Accept All Cookies
It was expected that Congress would enact legislation pertaining to the U.S. Federal estate, gift and GST tax laws for transfers in 2010, and, possibly, make such legislation retroactive to January 1, 2010. To date, Congress has not taken any such action. As matters now stand, there is no U.S. Federal estate or GST tax imposed on transfers in 2010, but the U.S. Federal gift tax still applies. The current state of affairs has given rise to tax planning opportunities that may be available, but only through the end of 2010.
Caveat: It is unclear whether Congress will or can take any actions to enact legislation retroactively increasing the gift tax rate or reinstating the estate and GST taxes for 2010. While it seems unlikely at this late stage that Congress will implement retroactive legislation, it is not certain that Congress will not attempt to do so.
Grantor retained annuity trust (GRAT). A GRAT is a tax efficient way to make tax free gifts, and is particularly effective in the current low interest rate environment. There are legislative proposals to reduce the attractive features of GRATs. One proposal is to require that a GRAT must have a term of at least 10 years. That would make GRATs less useful for individuals with shorter life expectancies as the grantor’s death before the expiration of the GRAT term causes inclusion of the trust assets in the grantor’s estate. Such proposal would also put an end to the popular practice of creating successive two-year GRATs to take advantage of appreciation during each two-year term. If you are considering creating a short term GRAT, you should do so as soon as possible.