Smith, Lehberger & Bodie - Family Law
Call Today for a Consultation
865-643-8626
Caring And Committed To Families And Children
Menu Contact

Trusts and rising interest rates

By using trusts as part of an estate plan, a Tennessee resident can ensure that certain assets are managed and distributed according to their wishes. Those who have been uncertain about using trusts may be interested to know that due to the recent rise in interest rates, certain types of trusts, such as GRATs and CLATs, can be very beneficial to grantors.

A grantor retained annuity trust, or GRAT, fuses together a trust that is to be used for a certain length of time and an annuity from which the grantor receives a set annual amount. The annuity payout that the grantor receives is their retained interest while the remaining value of the annuity gets passed down to the named beneficiaries.

A charitable lead annuity trust, or CLAT, is structured similarly to the GRAT. However, the recipient of the annuity payment is charity, and the main objective of using the trust is to increase the deduction value for donations made to charities. As the CLAT approaches its end date, any remaining value that is in the trust is passed to the grantor's beneficiaries. When the assets are placed in the CLAT, the current interest rate becomes locked in, and any excess investment performances are passed to the non-charitable beneficiaries without being assessed taxes.

An attorney who practices estate planning law may evaluate the finances of a client and recommend the appropriate types of trusts. The lawyer may also explain how to protect certain assets from mismanagement by beneficiaries. Trusts are often vital in this pursuit.

No Comments

Leave a comment
Comment Information

How Can We Help You?

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

email us for a response
Smith, Lehberger & Bodie

firm location:

Smith, Lehberger & Bodie
10265 Kingston Pike
Suite C
Knoxville, TN 37922

Phone: 865-643-8626
Fax: 865-337-7363
Knoxville Law Office Map

Firm numbers

office map image