If you want be optimally prepared for the future it is important to have a savvy South Carolina estate planning lawyer carefully evaluate the nature of your assets. All resources are not created equal; the exact form of certain assets are going to dictate the optimal course of action when you are developing a long-term financial plan with the well-being of your loved ones in mind.
Along these lines, if you have highly appreciable securities you may want to consider implementing the zeroed out GRAT strategy. In this context the acronym GRAT stands for “grantor retained annuity trust.” You as the grantor fund the trust and receive annuity payments annually throughout a term that you set forth when you create the GRAT.
The inclusion of a beneficiary is also part of the process. This beneficiary would receive any remainder left in the trust after the completion of its term, and because of this potential asset transfer the act of funding the trust is considered to be a taxable gift. Interest is accounted for using the Section 7520 rate that is in place at the time of the trust’s creation.
The objective is to zero out the GRAT, taking annuity payments equaling this entire taxable value over the term of the trust.
The trick is to fund the trust with securities that will exceed this estimated appreciation. According to a recent article in Forbes, Facebook founders Dustin Moskovitz and Mark Zuckerberg are said to have done this by funding GRATs with Facebook shares that are expected to skyrocket in value.
Even if you are not in such an ideal situation, zeroing out a GRAT could conceivably benefit you. To explore the strategy in depth, simply take a moment to sit down and discuss your situation with a good South Carolina financial planning lawyer.