There is a lot of confusion about GRATs, also known as Grantor Retained Annuity Trusts. Have they been eliminated? Do they still work?

Let's start by clarifying what a GRAT actually is. This technique was perfected by Audrey J. Walton and some GRATs are even known as Walton GRATs. Mrs. Walton was widowed and wanted to provide more assets from her late husband's estate to her children. There is a very strict limit on how much she could give away and she wanted to give more than the $10,000 that was allowed at the time. She took some stock and put it in a GRAT. This meant that over a period of years, she would get all of that money back and the family would pay some interest on it. What was the point of this if she wasn't making money on the stock? Mrs. Walton suspected was that the value of this stock would increase dramatically and it turned out she was right. Because it was in a GRAT, her heirs were able to keep all of the increased value and were able to return her investment.

There have been many efforts in Congress to eliminate short term GRATs which last only a few years. No laws have been passed and for the time being, GRATs remain a very effective estate planning technique. This is a sophisticated estate planning method that is used only when there is strong chance that the investment will bring a high return. It's not right for everyone which is why we recommend that you call David M. Frees at 610-933-8069 or email him directly at [email protected] to learn more.


David M. Frees, III
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Attorney, Speaker and Author