hard · Certified Financial Planner Estate Planning
Abramson, age 66, holds a liquid net worth of $4,000,000, which includes a $1,200,000 concentrated position in a utility stock with a cost basis of $110,000. He is interested in 'zeroing out' future estate taxes and asks for a recommendation on establishing a five-year Grantor Retained Annuity Trust (GRAT) to move the stock's future appreciation to his heirs.
Given that the 2026 Basic Exclusion Amount is $15,000,000, what is the most appropriate recommendation?
- Execute a private annuity sale to the heirs to remove the asset from the gross estate immediately.
- Diversify the utility stock first into an S&P 500 index fund before funding the GRAT to reduce risk.
- Immediately fund a five-year zeroed-out GRAT to capture appreciation above the Section 7520 rate.
- Retain the stock in the taxable account to ensure a full basis step-up at death under Section 1014.
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