Just to add to Tim’s analysis , for those considering using a GRAT, now is the time to act. GRAT’s have been closely scrutinized for years, and there has been some discussion, for quite some time, that new legislation could set a minimum GRAT term, or eliminate the technique altogether. Tim also touched upon the use of valuation discounts to further bolster the benefit of a GRAT. You may not be surprised to learn that valuation discounts have also been closely scrutinized, and the opportunity to use them may be severely curtailed, or eliminated altogether, by new legislation.
Finally, the potential tax savings which could result from the use of the GRAT has been magnified by 2010 tax laws which gave tax payers a 5Million ($5,120,000 in 2012) lifetime gift tax exemption for asset transfers. Immediately prior to this legislation, the lifetime gift exemption had been limited to $1,000,000. Many estate planners believe we may return to a $1 Million lifetime gifting exemption in 2013, which would severely limit the potential tax benefit of using a GRAT in the future when compared to the current opportunity.