Top Ten Trusts – 4 thru 6


Last Friday, I gave you trusts #1 thru #3 of the Top Ten Trusts.

my purpose here is to give you a layman’s summary of trusts you might use as you plan your financial life into the future. There are many more than ten, but this is my top ten for you to consider. Be sure to reach out to someone in the legal profession whose skill set includes estate planning and end of life planning. Good luck.

GRANTOR RETAINED ANNUITY TRUST – Known as a GRAT, this trust is used when, for example, a parent who might be subject to high estate taxes, transfers a large sum of money to the GRAT. The GRAT is designed to provide an annuity to the grantor. At the end of the trust‘s life, which might be as little as five years, the funds go to the children. However, the grantor, who is the parent, retains the annuity and the present value of the annuity is subtracted from value of the gift. This is a mathematical process based on life expectancy that effectively minimizes or eliminates the gift tax, provides income to the parent, and gets the large sum placed in the trust out of the estate of the grantor.


GRANTOR RETAINED INTEREST TRUST – Known as a GRIT, the most common is the qualified personal residence trust or QPRT. It’s sometimes known as the “house” trust. This is an irrevocable trust into which the grantor places a personally owned home while retaining an income right or the use of the property for a fixed period of years. The home, at the end of the specified period of years, will pass to non-charitable beneficiaries, such as a child or grandchild of the grantor. Generally, the grantor is making a gift of the future right to trust assets to the remainderman (family members). If the grantor survives the term of years selected, so that the home is not included in his gross estate, significant estate tax as well as other transfer cost reductions may be realized.


CHARITABLE REMAINDER TRUSTS – A CRT is a very effective way to give appreciated property to charity while receiving annual income. Perhaps you have a highly appreciated stock portfolio that is paying very little income. You‘d like to sell and invest the money in something more in line with your present circumstances. However, if you do that, you may be hit with capital gains tax. So you donate the stock portfolio to the CRT and arrange to receive an annuity. The charity which you have named in the trust sells the stock immediately and as a charity, pays no capital gains tax. You receive an income tax deduction for the donation based on the present value of the charitable gift. You remove the asset from your estate without paying a gift tax and convert the non-income paying portfolio into an annual income.

Tony Kendzior \ 16 AUG 2019