The Grat technique makes most sense for households subject to estate tax, experts said.
The federal estate tax is a 40% levy on estates valued at more than $12.06 million in 2022. The taxable amount is double that figure, or $24.12 million, for married couples.
Twelve states plus Washington, D.C., also have a state-level estate tax, the amounts and thresholds of which vary, according to the Tax Foundation.
Some of the nation’s richest people and well-known business scions have leveraged Grats, according to reports. They include Michael Bloomberg; Meta co-founder Mark Zuckerberg; Sheldon Adelson, the late casino magnate; the Walton family of Wal-Mart fame; Charles Koch and his late brother, David Koch; fashion designer Calvin Klein; Laurene Powell Jobs, the widow of Apple founder Steve Jobs; media mogul Oprah Winfrey; Lloyd Blankfein, senior chairman of Goldman Sachs; Stephen Schwarzman, chairman and co-founder of the private equity firm Blackstone.
“It’s the one-tenth of 1% of society to whom this is really applicable,” Richard Behrendt, an estate planner based in Mequon, Wisconsin, and a former estate tax attorney at the IRS, said of the trusts. “But for that segment, I think it’s a golden opportunity.”
The estate-tax threshold is scheduled to be cut in half starting in 2026, absent an extension from Congress. A Republican-passed tax law in 2017 doubled the estate-tax threshold to around its current level, but only temporarily.
This looming deadline may mean individuals with roughly $6 million estates (or $12 million for married couples) may weigh a wealth transfer now, too, experts said.