Senators push for bill to limit GRAT tax advantage.

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Summary of Senators introduce bill to curb GRAT tax break


Key points:

  • A new bill introduced by Senators Ron Wyden and Angus King aims to curb the abuse of grantor-retained annuity trusts (GRATs) to avoid taxes.
  • The Getting Rid of Abusive Trusts Act would impose new requirements on GRATs to prevent them from being used solely for tax avoidance.


The Senators introduced the Getting Rid of Abusive Trusts Act to address the misuse of GRATs, which allow individuals to transfer wealth to heirs while minimizing estate and gift taxes. The bill proposes requirements such as a minimum 15-year term for GRATs, no decrease in annuity amounts during the term, and a minimum value for the remainder interest at transfer for gift tax purposes. These provisions aim to prevent high-value trusts from being used solely for tax avoidance purposes.

Senator Wyden highlighted the unfairness of wealthy individuals using complex tax planning strategies to avoid paying their fair share of taxes. The bill also includes provisions to treat transfers of property between a trust and the owner as a sale or exchange for income tax purposes and to designate income tax paid on a GRAT’s income as a gift for gift tax purposes, unless reimbursed within the same year. These measures are intended to close loopholes that allow grantors to reduce their estate tax burden while avoiding income and gift taxes.

Senator King emphasized the need to hold wealthy individuals accountable for contributing to society through taxes, rather than exploiting tax-free trusts to pass on vast gains to their children. The bill aims to prevent the abuse of GRATs and ensure that tax-planning strategies do not unfairly benefit the ultra-wealthy at the expense of society.

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