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retained annuity trust, paying a qualified annuity interest under
section 2702(b)(1), and that the trust instrument should be
interpreted accordingly. Further, each GRAT specifies that the
trustee shall amend the trust if necessary to satisfy the
requirements of the law in order to ensure that the annuity
interest qualifies as a qualified annuity interest under section
2702(b).
The 1993 GRAT’s
Each of the 1993 GRAT’s provides for annual payments equal
to 23.999 percent of the initial value of the trust corpus,
referred to in each GRAT as the Annuity Amount. The Annuity
Amount is to be paid to the grantor for a term of 5 years or
until the grantor’s earlier death. During that time, no
distribution of trust income or principal may be made to any
other person.
Each of the 1993 GRAT’s also provides that if the grantor
survives the 5-year term, then the remaining trust property shall
be used to establish a separate trust for the grantor’s son.
However, if the trust ends by reason of the grantor’s death
before the expiration of the 5-year term, all remaining trust
property shall be disposed of under a Contingent Marital Annuity
Trust (CMAT) intended to qualify for the Federal estate tax
marital deduction for the grantor’s estate. Under the CMAT, the
grantor’s spouse will receive any Annuity Amount that would have
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Last modified: May 25, 2011