Tax Benefits of Grantor Retained Annuity Trusts May Be Reduced Soon

A grantor retained annuity trust (GRAT) is an effective estate tax reduction strategy specifically permitted in the Internal Revenue Code.  Assets that can generate income and/or appreciation in excess of the IRS valuation interest rate can transfer significant value to your heirs with minimal gift tax consequences, thereby reducing future estate tax.  Pres. Obama's budget proposal will eliminate the ability to set up so-called short-term GRATs, those having a term of less than 10 years.  This change in law is proposed to be effective when next year's budget is enacted, expected Fall of 2009.  Given the historically low interest rates, depressed asset values, and the proposed loss of using short-term GRATs, now is the time for those who could benefit from the GRAT strategy to take swift action.

Extended Tax Returns, Deadline Fast Approaching

New for certain 2008 tax returns: the IRS reduced the automatic 6-month extension to only 5 months for partnerships, limited liability companies (taxed as partnerships), and trusts. The extended due date is September 15, 2009, which is the same as for corporations which previously where the only entities with a due date one-month earlier than for individual tax returns. Individuals still have a 6-month extension, meaning that the extended due date is October 15, 2009.