Stephen J. Dunn, specialist in tax and trust and estate law at Demorest Law Firm, PLLC, presents a recent article entitled “Beyond GRATS and IDGTS.” In the article, Dunn explains how certain schemes used since the early 1990s to circumvent the Federal estate tax have largely failed in achieving their objective of reducing the value of an individual’s gross estate at death.  Dunn concludes by proposing an alternative, more effective, method for reducing a client’s gross estate.

Since U.S. Tax Court rulings rendered family limited partnerships ineffective for avoiding estate taxes, grantor retained annuity trusts (“GRATs”) and intentionally defective grantor trusts (“IDGTs”) have gained popularity.  Yet, Dunn warns, an IDGT will not reduce the value of an individual’s gross estate, and a GRAT may actually substantially increase the value of an individual’s gross estate.

Dunn proposes a solution in which a grantor establishes irrevocable trusts for his children and grandchildren.

For the full article, click here.