The GRATS Act: What Proposed Trust Reform Means for Estate Planning

What Happened

On March 20, 2026, Senators Ron Wyden (D-OR) and Angus King (I-ME) introduced the Getting Rid of Abusive Trust Schemes Act — the GRATS Act — a bill specifically targeting Grantor Retained Annuity Trusts. The proposal would fundamentally alter how GRATs can be structured by imposing:

• A minimum term of 15 years (up from the current effective minimum of 2 years)
• A maximum term tied to the annuitant's life expectancy plus 10 years
• A minimum remainder interest value at inception (eliminating "zeroed-out" GRATs)
• New reporting and compliance requirements for existing GRATs

The bill's stated goal is to prevent the use of GRATs primarily for tax avoidance — a characterization that, while politically resonant, oversimplifies what GRATs actually accomplish for families with concentrated wealth.

Why This Matters for Families

The Rolling GRAT Advantage Under Threat

Our research, grounded in Bernstein's extensive analysis of rolling short-term GRATs, demonstrates that 2-year rolling GRATs consistently outperform single long-term GRATs in both probability and magnitude of wealth transfer for liquid assets. The mechanics are intuitive: short windows crystallize gains quickly, and failures are isolated — a losing 2-year GRAT costs you nothing, while you capture every winning period.

A 15-year minimum term would destroy this advantage entirely. Under the proposed rules:

• Path segmentation disappears. You can no longer capture short-term volatility spikes independently.
• Mortality risk increases dramatically. If the grantor dies during the GRAT term, the trust assets are included in the taxable estate under §2036 — the exact outcome the GRAT was designed to avoid. A 15-year horizon materially increases this risk for grantors in their 50s and 60s.
• Illiquidity becomes the norm. Assets locked in a 15-year structure cannot be redeployed or restructured in response to changing market conditions.

The §7520 Rate Connection

The GRATS Act takes on additional significance in light of the §7520 rate dropping to 4.6% for April 2026 — down from 4.8% in March. This lower rate reduces the hurdle a GRAT must clear to generate a tax-free transfer. Under the current regime, a 2-year rolling GRAT funded today with volatile, high-growth assets has a strong probability of outperforming the 4.6% hurdle in at least some rolling periods.

Under a 15-year regime, the hurdle must be cleared across the entire term — a far more demanding proposition, particularly in an environment where our GPS projects US large-cap equities at a median +6.20% compound 10-year return (as of January 2026). The margin between projected returns and the §7520 hurdle narrows as the term extends.

Use our GRAT Calculator to model how different term lengths and §7520 rates affect transfer efficiency.

The Political Reality

Let's be direct: the GRATS Act is unlikely to become law in the current Congress. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, permanently set the estate tax exemption at $15 million per person and reflected a political consensus against tightening estate tax rules. The current administration and Congressional majority have no appetite for restricting wealth transfer tools.

But the introduction of this bill matters for three reasons:

1. Legislative intent is cumulative. Proposals like the GRATS Act establish a paper trail. When political power eventually shifts, prior proposals become the starting template for new legislation — often with minimal modification.
2. The revenue scoring exists. The Joint Committee on Taxation has scored GRAT reform as a significant revenue raiser in prior analyses. Future budget negotiations may revive these proposals as "pay-fors" for other priorities.
3. State-level activity is accelerating. New York is considering cutting its estate tax exemption from $7.35 million to $750,000. Washington is proposing rate reversions. State legislatures operate on different political timelines than Congress.

The Structural Alpha Opportunity

The current estate planning window is unusually favorable on multiple dimensions:

Factor	Current Status	Implication
Federal exemption	$15M per person (permanent)	Large transfers possible without gift tax
§7520 rate	4.6% (April 2026)	Lower hurdle for GRATs and CRTs
Short-term GRAT legality	Fully permitted	Rolling 2-year strategies available
SLAT flexibility	Intact	Irrevocable trust with retained access

Every one of these factors could change with a single legislative session. The GRATS Act reminds us that structural alpha is not permanent — it exists because the tax code currently permits it. Families who exploit these windows while they're open compound wealth in ways that are difficult to replicate once the rules change.

What to Do Now

This is not a call to panic. It is a call to act with intentionality while current rules remain in force:

1. If you've been considering a GRAT strategy, the case for implementation has strengthened. The combination of a favorable §7520 rate, the permanent $15M exemption, and the continued legality of short-term rolling GRATs creates an optimal planning environment.

2. If you hold concentrated stock positions, GRAT planning deserves immediate attention. The GRATS Act specifically targets the use case that benefits you most — transferring appreciated assets to the next generation with minimal transfer tax cost.

3. For families already in rolling GRAT programs, continue. Existing GRATs would not be retroactively changed under the proposed bill. However, the introduction of new GRATs under reformed rules would be subject to the new requirements.

4. Consider complementary strategies. Installment sales to intentionally defective grantor trusts achieve similar wealth transfer objectives through a different mechanism and are not targeted by the GRATS Act.

The legislative window is open. The political will to close it is building slowly. The optimal strategy is to act while the distinction between "open" and "closing" still works in your favor.