Gift and Estate Tax Strategies in Periods of Low Interest Rates

July 17, 2002 Advisory


Split-Interest Inter Vivos Trusts - GRATs, GRUTs, QPRTs, CRATs and CRUTs

Gifts made during one's lifetime, whether to individuals or charities, are usually more tax efficient than testamentary gifts. Lifetime gifts allow one to remove not only the value of the gift from one's taxable estate, but also any future appreciation in the value of the gifted property. Moreover, charitable gifts made during life usually also generate state and federal income tax deductions.

Often, however, a person making a gift is not ready to fully part with the property to be gifted, particularly if it produces income (e.g., rental properties or marketable securities). In such situations, use of "split-interest inter vivos trusts" can accomplish two goals: preserving an on-going interest of the donor in receiving income or being able to use the trust property, while also achieving estate tax savings through the use of lifetime gifts.

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