Creative Wealth Planning With Grantor Trusts, Family Limited Partnerships, and Family Limited Liability Companies

With both the GRAT and the IDGT, it is prudent for the estate owner to gift or sell a discountable income-producing asset to the trust, and to avoid receiving back payments with assets “in-kind” which are not discountable, such as cash, in order to maximize the potential for significant wealth shifting. The goal is to avoid “in-kind” payments from the trust to the grantor when payments are subject to valuation discounts. Transferring discounted assets into a trust and receiving discounted assets back out of the trust is inefficient because it will defeat the wealth transfer and asset protection originally built into the plan, and is costly to accomplish. These issues will be discussed more thoroughly throughout this article.