GRATs are hot. Given today’s low interest rates and volatile markets, they afford tremendous opportunities for shifting asset appreciation free of gift and estate taxes. GRATs are seemingly noncontroversial. The GRAT technique is blessed by statute, regulations and case law. The basic GRAT format is simple: (i) a grantor contributes an asset with meaningful appreciation potential; (ii) the grantor receives a fixed payment (typically a percentage of the asset’s initial fair market value, computed so that there is virtually no present gift) over a set term; and (iii) the designated remainder beneficiaries receive any value remaining at the end of the term — gift tax free. However, the GRAT format is tightly regulated, so proper care in drafting, funding, and ongoing administration is essential to the success of any GRAT. This article covers several of the most important considerations in designing and implementing GRATs.

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