GRAT, SLAT & QPRT: Advanced Trust Strategies for Wealthy Families

With the estate tax exemption permanently at $15M, most $2M–$20M families won't owe estate taxes. But three irrevocable trust structures still do real work at this wealth level—transferring appreciation, preserving access, and locking in gains for future generations.

Why advanced trusts still matter post-OBBBA

The One Big Beautiful Bill Act (OBBBA, July 2025) permanently raised the federal estate and gift tax exemption to $15 million per person ($30M for married couples).¹ For most families in the $2M–$20M range, this eliminates the immediate estate tax threat.

But three scenarios make irrevocable trust strategies still worth understanding at this wealth tier:

• Your estate could grow past $15M. A $6M estate at 55 with 25 years of 7% annual growth reaches $32M at 80—well above the exemption. Transferring appreciating assets now locks in today's value.
• You want to transfer wealth beyond the exemption without gift tax. GRATs let you move the appreciation above the IRS hurdle rate to heirs at zero gift tax cost—without touching your $15M lifetime exemption at all.
• You want to use the exemption strategically. SLATs let you gift assets to an irrevocable trust (using your exemption) while your spouse retains access—hedging against both asset growth and a future exemption reduction.

GRAT: Grantor Retained Annuity Trust

A GRAT is an irrevocable trust where you transfer assets in, receive fixed annuity payments back for a set term, and pass any appreciation above the IRS hurdle rate to heirs—completely free of gift tax.

How it works

1. You transfer assets (stocks, a business interest, appreciated real estate) to the GRAT.
2. You receive annual annuity payments for the trust's term (typically 2–10 years). These payments are calculated so their present value—discounted at the IRS Section 7520 rate—equals the full value of what you transferred. This is called a "zeroed-out GRAT": the taxable gift is effectively $0.
3. At the end of the term, any remaining balance in the trust passes to heirs with no additional gift or estate tax.

The GRAT "succeeds" when the assets outperform the IRS Section 7520 hurdle rate. For May 2026, that rate is 5.00%.² Every dollar of appreciation above 5.00% annualized passes to heirs tax-free. If the assets underperform the hurdle rate, the GRAT "fails"—you simply receive your assets back via the annuity, with no gift made and no harm done.

GRAT strategy: rolling short-term GRATs

Rather than a single 10-year GRAT, many families use 2-year rolling GRATs: fund a new one each year with appreciated assets. This approach:

• Reduces mortality risk (if you die during the GRAT term, assets return to your estate—shorter terms mean smaller exposure windows)
• Captures volatility—a stock that swings up 40% in year one of a 2-year GRAT generates a large tax-free transfer even if it pulls back in year two
• Allows you to deploy new appreciated assets each year rather than locking them up for a decade

Best assets for GRATs: high-growth stocks, pre-IPO shares, S-corp or LLC interests in growing businesses, concentrated positions before a liquidity event.

GRAT Success Calculator

Enter the assets you're considering transferring, your expected annual growth rate, and the GRAT term. The calculator shows your annual annuity, the projected tax-free transfer to heirs, and the break-even growth rate.

What GRATs don't do

GRATs don't provide asset protection—assets are returned to the grantor via annuity payments and can be subject to creditors. They also require the grantor to survive the term; if you die during the GRAT, the assets are pulled back into your taxable estate. This makes short-term (2-year) GRATs generally preferable over long-term structures from a mortality risk standpoint.

SLAT: Spousal Lifetime Access Trust

A SLAT is an irrevocable trust funded with a gift from one spouse to a trust that benefits the other spouse (and typically children and grandchildren). The key feature: the beneficiary spouse can access the trust's income and principal during their lifetime, so the family's effective access to the assets isn't entirely lost—even though the assets have left the grantor-spouse's estate.

Why families use SLATs post-OBBBA

With the $15M exemption permanent, SLATs are less urgent for estate tax avoidance. They still serve two functions:

• Asset protection. Assets in the SLAT are outside the grantor's estate and generally beyond the reach of the grantor's future creditors. For business owners, physicians, and executives with liability exposure, this matters independently of estate tax.
• Locking in the exemption before it could change. Congress can always lower the exemption in future sessions. Gifting assets to a SLAT now uses the current $15M exemption—if the exemption drops in 2030, the assets already in the trust are sheltered regardless.

SLAT mechanics

One spouse (the "grantor") makes an irrevocable gift of assets—say, $3M in appreciated stock—to a trust that names the other spouse as beneficiary. The gift uses $3M of the grantor's $15M lifetime exemption. No gift tax is owed. The assets grow outside the estate. The beneficiary spouse can receive distributions for health, education, maintenance, and support (HEMS standard) or a broader standard depending on how the trust is drafted.

Key SLAT risks

• Divorce: The grantor-spouse loses access entirely if the marriage ends. The ex-spouse continues to benefit from the trust (unless the trust is drafted with divorce protections).
• Predeceasing spouse: If the beneficiary spouse dies, the grantor loses indirect access. The assets continue in trust for children and grandchildren, but the grantor can't benefit.
• Grantor tax status: SLATs are typically "intentionally defective grantor trusts"—the grantor pays income tax on the trust's income, which is a feature (additional wealth transfer) but a cash-flow cost to understand upfront.

QPRT: Qualified Personal Residence Trust

A QPRT transfers your primary residence (or a vacation home) to an irrevocable trust while you retain the right to live in the home for a fixed term. At the end of the term, the home passes to heirs—using a gift value that is discounted below the home's current market value.

The tax mechanics

The discounted gift value is calculated using the IRS Section 7520 rate. At a higher 7520 rate, the retained interest is worth more—which means the gift to heirs is valued at less. With the May 2026 rate at 5.00%, a $2M home transferred to a 10-year QPRT might be valued as a gift of roughly $1.2M–$1.4M (depending on your age and the term), using that amount of your $15M exemption rather than the full $2M.³

When QPRTs work best

• You expect the home to appreciate significantly over the trust term
• You're confident you'll survive the trust term (if you die during the term, the full home value returns to your estate)
• You're comfortable paying fair-market rent to your heirs after the term ends (required to continue living in the home without creating a gift)
• Your estate is approaching or above the $15M exemption and you want to transfer the home at a reduced gift value

For families with estates well below $15M, QPRTs are less compelling unless the home is expected to dramatically appreciate or the family has specific estate planning goals.

Which structure is right for you?

Sequencing these strategies

For a $6M household at age 50 with significant growth ahead:

1. Foundation first: Revocable living trust + updated beneficiary designations + four essential documents. Non-negotiable regardless of estate tax exposure.
2. GRAT for high-growth assets: Stock concentrated positions, pre-liquidity business interests, or equity compensation grants. No exemption needed; pure upside.
3. SLAT if the estate is on track to grow past $10M: Fund with $2M–$4M of appreciated assets. Uses exemption now; preserves family access through spouse.
4. QPRT if real estate is a significant part of the estate: Evaluate once the above are in place. Less time-sensitive than GRATs or SLATs.

These structures require an estate attorney to draft correctly—the tax benefits disappear quickly with structural errors. A fee-only financial advisor coordinates the planning (what to fund, how much, when) while the estate attorney executes. These are different disciplines.

See also: Estate Planning Basics for Wealthy Families → | Concentrated Stock Strategies → | Charitable Giving and DAF Strategies →

Sources

1. IRS — 2026 Tax Adjustments Including OBBBA Amendments. Estate and gift tax exemption: $15,000,000 per individual ($30,000,000 married with portability), permanent under OBBBA (Pub. L. 119-XXX, July 2025). Annual gift tax exclusion: $19,000/recipient ($38,000 married gift-splitting). GST exemption: $15,000,000. Values verified May 2026.
2. IRS Internal Revenue Bulletin 2026-19 (Rev. Rul. 2026-9). IRS Section 7520 rate for May 2026: 5.00%. Rate is 120% of the applicable federal midterm rate, rounded to the nearest 0.2%, per IRC § 7520(a).
3. Fidelity — Grantor Retained Annuity Trusts (GRATs). Overview of zeroed-out GRAT structure, hurdle rate mechanics, and rolling 2-year GRAT strategy. QPRT valuation methodology per IRC § 2702.
4. Kitces — Spousal Lifetime Access Trust (SLAT) Planning Considerations. Analysis of SLAT structure, reciprocal trust doctrine, grantor trust income tax treatment, and divorce/predeceasing-spouse risks.

Estate and gift tax exemption and IRS Section 7520 rate verified against IRS IRB 2026-19 and IRS newsroom, May 2026. These strategies require qualified estate planning counsel; this page is educational, not legal or tax advice.