Robert W. Finnegan has an excellent article in the current issue of Trusts & Estates (April, 2023) entitled, “The GRAT Enhancement Strategy.”
From the article:
- Grantor retained annuity trusts (GRATs) have been a great wealth transfer success story…the shortcoming of successful GRATs is that their assets will be included in the children’s taxable estates.
- With the GRAT enhancement strategy, the GRAT remainder makes a split dollar loan to a dynasty trust to purchase life insurance, moving appreciation of GRAT assets via the policy death benefit to the dynasty trust.
Finnegan provides a robust and detailed Case Study illustrating the benefits of this planning and concludes with “The GRAT enhancement strategy is a powerful wealth transfer tool in and of itself. It’s applicable to GRATs, staged distribution trusts and any trust in which the assets have been removed from the clients’ estates but will be taxed in the children’s estates. Clients may be more receptive to additional planning if they can minimize their involvement and expenses and use assets that have already been transferred.”
I highly recommend this article for your review and consideration.