San Diego Estate Planning Lawyer Blog
A Grantor Retained Trust (“GRAT”) is an advanced estate planning technique used by the wealthy to gift rapidly appreciating assets to another individual or charity without having to pay estate or gift tax. It is a special type of irrevocable trust that allows the creator of the trust, the “Trustor”, to put specific assets into the trust while retaining the right to receive an annual annuity payment for a certain number of years. When the term of the GRAT ends, the balance is distributed to the trust beneficiaries, usually children or other beneficiaries chosen by the Trustor. The Trustor is betting on the fact that the assets transferred into the GRAT will increase in value at a rate substantially higher than the interest rate used by the IRS (called the 7520 interest rate.
Recently Nike chairman Phil Knight contributed 2 million shares of Nike stock to the Phillip H. Knight 2010 Annuity Trust. This was the fourth trust that Knight has set up. The Securities and Exchange Commission said the filing by Knight on December 30, 2010 names Pat Kilkenny as trustee. Kilkenny served as the University of Oregon’s top athletic official when Knight donated $100 million to the University of Oregon. As a result of this transfer Knight, the co-founder of Nike, has 67.7 million Class B shares of stock in Nike. Obviously, Knight has faith that stock in the company he founded will continue to appreciate in value.
At Scott C. Soady, A Professional Corporation, we help families and individuals with a wide range of wealth and assets. Our estate planning is tailored to meet your needs. Contact us to schedule a complimentary appointment.