Albany Lawyers for Grantor Retained Annuity Trusts (GRATs)

If you are seeking to transfer appreciating assets to the next generation while reducing potential gift and estate tax exposure, a Grantor Retained Annuity Trust may be an effective option. A GRAT is an irrevocable trust that allows the person creating it – the grantor – to transfer assets to beneficiaries while retaining the right to receive annuity payments for a specified term.

At Pierro, Connor & Strauss, our experienced Albany estate planning lawyers understand the nuances of GRAT planning and can help you extract maximum advantage from this and other estate planning tools.

As longtime members of the Albany legal community including the Capital Region, we have deep experience in estate planning law and a thorough understanding of the unique challenges and opportunities facing high-net-worth individuals and families in the Capital Region.

If you’re exploring advanced wealth-transfer strategies, our Albany GRAT attorneys can help.

What is a GRAT?

A GRAT is an irrevocable trust, meaning it generally should not be revoked or freely modified once established; however, with careful planning, there are strategies to adjust or unwind certain aspects of the trust. The unique structure of a GRAT allows the grantor to transfer assets to beneficiaries while reducing or even eliminating gift and estate taxes.

The grantor retains the right to receive a fixed annuity payment from the trust for a specified term, after which the remaining trust assets pass to the designated beneficiaries.

The gift value of the GRAT is calculated using the IRS 7520 rate, which is based on prevailing interest rates. If the assets in the GRAT appreciate at a rate greater than the applicable Section 7520 rate, the excess appreciation may pass to the beneficiaries without additional gift or estate tax, provided the grantor survives the GRAT term and other requirements are satisfied.

Albany Trusts Team

Louis W. Pierro

Anthony K. Khatchoui

Call us today for a FREE consultation

(866) 951-7526

Happy multi-generation family preparing Thanksgiving lunch in the kitchen.

Avoiding New York’s Estate Tax “Cliff”

A GRAT may be particularly valuable as part of planning for New York residents whose estates are approaching the state estate tax exemption.

For 2026, New York’s basic estate tax exclusion is $7.35 million. New York’s estate tax system includes a significant “cliff”: the estate tax benefit of the exemption begins to phase out once a taxable estate exceeds the exemption and is eliminated when the taxable estate reaches 105% of the basic exclusion amount.

By transferring appreciating assets through a GRAT, a properly structured plan may shift future appreciation outside the grantor’s taxable estate and help reduce potential New York estate tax exposure.

“The greatest benefit I have seen with GRATs often comes from identifying the right asset at the right moment- particularly an asset with meaningful potential for appreciation – and putting a thoughtful structure around that opportunity. When we help a client create a GRAT, we’re not simply addressing taxes; we’re giving a family a way to transfer future growth to the next generation while retaining a meaningful level of financial flexibility today.”

—Louis W. Pierro, Founder, Pierro, Connor & Strauss

When GRAT Planning Works Best

While a GRAT can benefit anyone looking to preserve assets and reduce estate taxes, it is especially useful in certain situations. For example, you may want to consider establishing a GRAT if you have:

Significant concentrated assets

If much of your wealth is allocated in a few stocks or other high-growth investments, a GRAT can help pass along the future gains to your beneficiaries in a tax-efficient way.

Potentially appreciating assets

A GRAT may be particularly effective when assets are expected to appreciate significantly during the trust term. For closely held businesses or other assets involved in a potential liquidity event, careful planning well in advance of a sale is essential.

Temporarily undervalued or volatile assets

A GRAT may be attractive when an asset is expected to appreciate significantly but is currently valued at a relatively low level.

Closely held or illiquid assets

Interests in private businesses and other hard-to-value assets may be appropriate for GRAT planning, although valuation, administration and liquidity requirements must be carefully considered.

High estate tax exposure

If your estate exceeds federal or New York exemption limits, a GRAT can help reduce the taxes your beneficiaries might otherwise face.

Planning Considerations for a GRAT

A GRAT can be a powerful wealth-transfer strategy, but its effectiveness depends on careful design, appropriate assets and the grantor’s circumstances.

For example, the timing of the trust term is an important factor. The grantor’s survival through the GRAT term is an important consideration. If the grantor dies during the term, the remaining trust assets may be included in the grantor’s estate, potentially reducing or eliminating the anticipated estate-tax benefits. One planning approach is a “laddered GRAT,” which involves establishing a series of shorter-term GRATs rather than relying on a single trust. This approach can provide greater flexibility and allow new trusts to be established as circumstances and investment opportunities change.

It is also important to consider factors such as changes in the IRS Section 7520 interest rate and the performance of assets held in the trust. Aligning the GRAT with assets that have strong growth potential and structuring it strategically can help support the desired tax outcomes.

With careful design and ongoing attention, a GRAT can be a highly effective component of a comprehensive estate planning strategy.

Implementing a GRAT In Your Broader Estate Plan

As effective as a GRAT can be on its own, you can amplify its benefits when implementing it alongside other wealth transfer strategies.

GRATs can also be considered as part of a broader wealth-transfer strategy. Depending on a family’s circumstances, a GRAT may be coordinated with other planning techniques, including Spousal Lifetime Access Trusts (SLATs), Irrevocable Life Insurance Trusts (ILITs) and dynasty trusts. Each strategy serves a different purpose and should be evaluated as part of the overall estate plan.

Protect Your Legacy With Sound Estate Planning Strategies

Like all estate planning tools, a GRAT is a means of preserving your legacy and making life easier and more prosperous for the next generation.

At Pierro, Connor & Strauss, we are dedicated to achieving the estate planning goals of our valued clients in Albany and throughout the Capital District. Contact us today to learn how we can help you create a comprehensive plan that employs GRATS and other estate planning tools to protect your wealth, assets, and most cherished wishes.

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Contact us today for a FREE consultation and we’ll be happy to help take the worry out of tomorrow so you can live today.

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