Aside from the drawbacks mentioned above, one more crucial thing to notice is that President Obama fought GRATs as an estate reduction tool in his budget proposals throughout his time in office. The budget proposals addressed GRATs on two fronts: 1 GRATs can be required to have a minimal term of 10 years, which increases the possibility that the trustmaker/grantor will die in the course of the term of the trust and cause the GRAT assets to be pulled back into the trustmaker/grantor’s taxable estate, and 2 zeroed out GRATs can be eradicated. Instead, transfers into GRATs would be required to have a major value for gift tax functions. Both of these changes would have significantly restricted the effectiveness of GRATs as an estate tax reduction method.
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