Involves a grantor, Irrevocable trust, trustee, beneficiary
The grantor retains an income right
GRIT- Grantor retainer income trust
The benefit for the beneficiary will have a small discount rate
The future growth rate will not be taxed to the beneficiary after the gift tax has already been paid.
Kids could receive 3 million dollars only have to pay 800000 in gift taxes because the appreciation of the trust.
If you transfer using a GRIT then the great deal option is removed and will deem the value of your retained interest as zero. The kids are taxed full value of the trust amount.
The exception to the rule is if you use a GRAT or GRUT trust.
Operate very similar to the way GSAT, GSUT trust work
It is allowed value if under one of these 2. Permits interest that have value
If a term trust and if survives trust term then excluded
If fail to survive assets included
QPRT- qualified personal residents trust
Client had house worth 2 million dollars=FMV; 70 years old; house is in the trust; beneficiary is the child; term= 10 years;
Grantor retains a right of occupancy
Value for the child is 1.14 million
If the grantor out lives the term then the property is fully vested for the child.
Grantor has no further interest
Have to start paying FMV of rent
SCIN- Self Canceling Installment Note
Company worth 2 million dollars; single owner (dad); basis in the business is 500,000; wants to transfer the company to his son now; 10% growth rate