Tax Benefit: Faster Results and a Larger Amount
Grantor trust saves family millions
To save estate taxes, Donny Dial advised the majority shareholder of a manufacturing business to transfer some of his stock to a “grantor retained annuity trust” for the benefit of his children. There was no taxable gift, because the trust was to pay him the appraised value of the stock over eight years, partly in cash from dividends, and partly by returning a few shares of stock to him each year if it had insufficient cash.
Soon after the trust was created, the company received an offer to buy its business at a much higher price. In the sale the trust received much more than needed to pay off its obligation to the father. The remaining trust funds went to the children with no gift or estate tax, saving the family millions of dollars.