If you can remember when there was no such thing as high/low cholesterol, then you can also remember when estate planning was nothing more than preparing a simple will. Trusts were only for the rich and famous and most of us did not fall into that category.

Well, times have changed! As you have accumulated wealth and computers work so quickly, trusts are now affordable tools for almost everyone to avoid probate and guardianship and to preserve wealth and not pay Uncle Sam excessive estate taxes.

The "Alphabet Soup" of trusts are a variety of trusts (GRITS, GRATS, GRUTS, FLPS) designed to aid people with estates valued over $675,000. The tax rate starts at 37%  and goes as high as 55%. 

Due to the complexity of these trusts, please check with our office or an estate planning attorney for assistance to avoid unnecessary taxes upon death. 

• GRAT (Grantor Retained Annuity Trust) is a transaction in which assets are contributed to an irrevocable trust and grantor, or applicable family member receives a certain level of payment for a term or for life (thus the term annuity). The annuity value is assessed and subtracted from the total value of the transfer. Only the difference is included as a gift for tax purposes.

• GRUT (Grantor Retained Unitrust) is a transaction in which assets are contributed to an irrevocable trust and the grantor or applicable family members receives a percentage return on the total asset value, at least annually, with ultimate beneficiaries (the grantor's family) receiving the assets after expiration of the term established. The value of the percentage payments is determined as of the date of transfer subtracted from the total transfer value so the only gift made for tax purposes would be the difference.

With both GRUTS and GRATS, should the donor/settler die within the term of the trust, the full value of the trust assets would be included in the donor's estate. Thus these trusts are not usually appropriate for a donor who is ill or in very advanced years.

GRUTS and GRATS are only available in general for spouse or children beneficiaries. Nieces, nephews, aunts, uncles, and cousins are excluded.