Grantor retained annuity trusts (GRATs) are a longstanding staple of high-end estate planning. The basic structure is well-traveled: a grantor transfers appreciating assets to an irrevocable trust, retains an annuity for a fixed term, and—if the assets outperform the rate on the annuity—shifts excess appreciation to beneficiaries with comparatively little gift-tax cost.
In the Wall Street Journal, Ashlea Ebeling reports on a Tax Court case involving a GRAT structure and asset swaps with the grantor. The issue is less about the viability of GRATs—the basic structure works—than about how far taxpayers can push an already powerful wealth transfer technique. In addition, the case is notable because estate-planning strategies are rarely aired publicly and in detail—and because the taxpayers challenge regulations under Loper Bright.
Will the Journal’s coverage be the item that moves GRATs into the broader public consciousness? Ebeling’s article certainly makes the arcane structure accessible for a lay audience. One quibble: the “gains” portion of the article’s graphic may look a little slim for a successful GRAT. Excerpts from her excellent reportage, as well as a link to the Tax Court docket, below the fold.
Ashlea Ebeling, The IRS Is Cracking Down on a Favorite Way the Ultrawealthy Pass On Money, Wall St. J. (Sept. 21, 2026):
The Internal Revenue Service is calling foul on an heiress who used the strategy [involving GRATs and promissory notes from the grantor]—and is slapping her and her husband with a $736 million tax bill. . . .
Trisha [Elcan] funded the GRATs with interests in holding companies with HCA Healthcare stock. The disputed move came when she purchased assets from the GRATs in exchange for interest-bearing promissory notes, which she was required to repay. The trustee for the GRATs paid the annuities due to her by forgiving portions of the notes. . . .
“Just do the tried and true thing with GRATs,” said Diana Zeydel, an estate lawyer and global chair of the private wealth services practice at Greenberg Traurig in Miami. . . .
“Why put yourself in the crosshairs?” she said.
Tax Court docket: Elcan v. Commissioner, No. 3405-25, https://dawson.ustaxcourt.gov/case-detail/3405-25.
Related TaxProf Blog coverage:
- Galle, Gamage & Lord: Taxing Dynasties (Apr. 15, 2025)
- Stepping Up Basis in Living Taxpayer Assets with Upstream Wealth Transfers Through Intentionally Defective Grantor Trusts (Jan. 1, 2025)
- GRATuitous Wealth: How Wealth Transfer Tax Avoidance Contributes to America’s Unwinding (Dec. 11, 2024)
- NY Times: How One of the World’s Richest Men Is Avoiding $8 Billion in Estate & Gift Taxes (Nov. 30, 2024)
- Reforming the Grantor Trust Rules (Dec. 30, 2023)
- ProPublica: More Than Half of America’s 100 Richest People Exploit GRATs to Avoid Estate Taxes (Aug. 27, 2021)
