Wealth Preservation, Trusts and Estates

First a few preliminaries on the Grantor Retained Annuity Trust or GRAT.

What is a GRAT? GRAT stand for Grantor Retained Annuity Trust. It is a special trust where you can make a gift and get the original amount back over a period of years and the growth of the asset remains in the trust - usually, for children.

Why do people do GRATs? GRATs are often used in times of low interest rates, and low asset values to move substantial growth in an undervalued stock, family business, or even real estate, out to the next generation.

Can you give an example? Yes. Mrs Walton (Sam Walton’s wife) contributed a substantial amount of Walmart stock to a GRAt for her children. The trust had to pay her back the stock (or cash) plus interest over a peiod of years. However, because her stock rose so much in value, even when she was paid back, a great deal of wealth remained in the trust for her heirs. She paid no gift tax becasue the GRAT was structured, so that at the time of the transfer, there was no gift.

Should I get my GRAT done before the end of the year? Well, a GRAt is an irrevocable trust. So, you should thoroughly and completely understand the GRAT before you sign and fund it. However, in the current economic environment, a GRAT can be a very powerful estate planning tool.

GRAts are complicated to set up but once you go through the process, they are fairly easy to use and to administer and the payoff to your heirs can be huge.

Since you must out live the term of the GRAt for it to work it’s magic, careful consideration should be given to how fast the GRAT should pay you back. But, once you know that the GRAt is for you, the sooner you fund it the better.

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David M. Frees III on GRATS - Grantor Retained Annuity Trusts

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James Douglas Kaune, Attorney to be?

This article was posted
by Douglas L. Kaune, Esquire
Estate Planning, Estate Administration, Wills,
Trusts, Elder Law,
Unruh, Turner, Burke & Frees
Phoenixville, Malvern, West Chester
Pennsylvania Attorney
dkaune@utbf.com PH: 610-933-8069

I have had a recent addition to the family, my son, James Douglas Kaune.  Welcome to our lives James!! Taking my own advice, my wife and I immediately updated our estate planning documents including wills, powers of attorney and trusts.  We also modified our beneficiary designation forms in IRA’s, 401k’s and life insurance to name the testamentary trust for my son if something happens to my wife and me.  We want to make sure James is well taken care of and that the correct trustee is apppointed to oversee his inheritance. This will help to make sure these assets are protected from poor spending habits, future creditors and possible divorce (A long time from now I hope!)  Take a look at this article for some advice when determining what type of trust, what trust provisions and what trustee would be best suited to take care of the assets you leave for your children. We are looking forward to long healthy lives with James, but want to make sure that we take all the necessary steps to make sure he is well cared for under all circumstances.

Douglas L. Kaune, Esquire
Serving, Chester, Montgomery, Delaware
Bucks and Philadelphia Counties

Our best laid plans can go awry. And, as they say in the armed forces, “No plan survives contact with the enemy.” Indeed, many financial plans have been rendered obsolete or non functional by recent events.

As we have observed before, many wills and estate plans in Pennsylvania fail because families fail to structure their assets and beneficiary designations to match the plan. A will or trust says one thing but the assets are jointly titled or otherwise pass outside of the plan. In other cases, a plan fails because the unimaginable happens.

Does this mean that you shouldn’t plan for retirement, college tuition, weddings, tax savings, and to pass on your assets? To the contrary. Plans are like goals.

If we fail to set goals we have no basis to act or to judge the progress we are making. Just yesterday I met a 24 year old man who set a goal to create a million dollar a year company by the time he was 21. He missed his goal by 18 days. But, he said that he would never have achieved it without setting that goal. It motivated him and it allowed him to see how he was doing and to adapt.

Establishing a plan means that we might fail to achieve the end result. The plan may need to be revised and we may need to adapt. But we are almost always better off having gone through the planning process.

And, in times of trouble, we need information to help us to adapt the plan. So, below are a few links that might be useful in revising the plan and in adapting to our new circumstances.

And because many people hear only the bad news, take a moment to consider the good news. Gas prices, while rising slowly have been quite low. Many families are saving at rates not seen for decades. We are still giving to charity and are vacationing in our own country rather than spending dollars overseas.

There is little purpose in subjecting ourselves to constant bad news. For many people, that means that they become so absorbed in the bad and what is beyond their control, that they fail to act on matters still within their control.

We can still have a say in government. So watch how the government spends the money and tell them what you think with your letters and your vote. The spending can be viewed by clicking here. or by visiting http://www.recovery.gov/

Want to calculate how much you now need to retire? Want to make a gift to charity and need to know if you can? There are a number of great financial and personal calculators here. Just click www.paesateplanners.com for links to several tax and personal financial calculators. Then start doing what you can. Work on what you can control rather than worrying about the matters outside of your control. You will feel better.

David M. Frees III

Follow David Frees on Twitter for estate, tax, financial, and asset protection planning information
for you and your loved ones.

Unruh, Turner, Burke and Frees offers legal services in a variety of fields and has offices in West Chester Pennsylvania, Phoenixville Pennsylvania, and Malvern Pennsylvania. The firm services clients the greater Philadelphia area including Chester County, Montgomery County, and Delaware County.