High net-worth clients set up Grantor Retained Trusts (GRT) to ensure gifts go to specific beneficiaries and to avoid annoying taxes. GRTs are irrevocable, though, so your clients need to understand the consequences of placing assets in them.
Here are some best practices for helping your clients find appropriate solutions:
- Work to find the ideal GRT for the client’s needs. Explain how the technical differences in GRTs will impact them. How will the choice affect the income or benefits the grantor receives, for instance? Don’t make assumptions. Probe and ask questions to get a handle on the client’s values.
- Encourage your client to consult with his or her accountant to understand all the tax consequences of the GRT, both for themselves and their beneficiaries.
- Take your client’s health into consideration. This can be a delicate issue, but make it clear to your client that a GRAT, for example, is only useful if he or she outlives the trust period. Otherwise, the GRAT assets revert to the estate, and they are taxed accordingly. Of course, no one can predict death, but a GRAT isn’t a suitable choice for a terminally ill person – and the client may not reveal a health issue unless you clearly explain the trust terms.
- Irrevocable means the beneficiary can’t change. That’s crucial for the client to understand. If the beneficiary is a child or grandchild who turns out to have a substance abuse or other serious problem, they will still receive the assets at the end of the trust term.
- Have your client divulge their entire net worth. Even though GRTs only make sense for those whose estates are subject to taxes, clients can leave themselves vulnerable once the trust term ends and they no longer receive income.
The Wealth Docx® GRT
Wealth Docx software includes a system containing GRAT, GRIT and GRUT documents, along with ancillary documents. The latter include GRT certificate of trust, trustee removal and replacement. All documents are written in plain English, so your client can easily understand and review them. Explore more resources on our site, or contact us to learn how to integrate these tools into your practice to serve your clients better.
