Gift, GRAT, IDGT, or Hold for Step-Up on $4 Million of Stock? The 10-Year Break-Even for a $22 Million Estate (October 2026)
The scenario: $22 million estate, $4 million in one stock
Say you're single, 62, and your estate is $22 million in a state with no estate tax. $4 million of it is one stock you bought for $1 million. The 2026 federal exemption is $15 million, so roughly $7 million of your estate sits in the 40% bracket today.
You're weighing four moves for that stock: hold it for the step-up in basis, gift it outright, fund a GRAT, or sell it to an IDGT.
Everything below is a constructed example, not a quote or a forecast. Your numbers will differ based on your specific situation. The gap between your numbers and mine is the point of this post.
What this week's card news teaches about comparing estate options
It's an odd place to look, but this week's NerdWallet stories are a short course in comparing things that cost something now and pay off later.
The fee test. In "Chase, IHG Add $350-Annual-Fee Card and Overhaul Their 2 Existing Ones," Chase adds a $350-annual-fee card and raises the fee on the IHG One Rewards Premier World Elite Mastercard to $150. Nobody asks "is $350 a lot?" They ask "will I get more than $350 back?" The trust version is fees divided by your tax rate. At a 40% estate tax rate, every $1 of fees needs $2.50 of growth to leave your estate before the trust pays for itself. If a trust costs $40,000 over ten years (my assumption below), it has to move $100,000 of growth out of the estate just to break even.
The two-tier test. "Should U.S. Bank's New Credit Cards be 'Essential' for Your Business?" covers a base Business Essentials Visa and a Signature Plus version, both launched Sept. 28. The question for any two-tier product is whether the upgrade earns its keep. A direct gift is the base card. An IDGT is the Plus. The extra complexity has to buy something measurable.
The devaluation test. "Bilt to Reduce Hyatt Transfer Ratio to 4:3 in 2027" says that from Jan. 1, 2027, 1,000 Bilt points will become 750 Hyatt points instead of 1,000. That's a 25% cut in what arrives. From the buying side, you need 33% more points (4 ÷ 3 = 1.333) for the same result. Estate tax is the same arithmetic with bigger stakes. At 40%, getting $1 million to an heir takes $1,666,667 of pre-tax value above the exemption. Bilt's 25% made headlines. The 40% is the one in your plan.
Also, Oct. 6 is National Taco Day, and a BOGO taco needs no spreadsheet. Estate decisions aren't that kind.
The assumptions behind the comparison
- Stock: $4,000,000 today, $1,000,000 basis, growing 8% a year for 10 years to $8,635,700 (4,000,000 × 1.08¹⁰).
- Other assets: $18 million, held flat to isolate the stock decision. The exemption is held at $15 million. It's indexed, so this slightly overstates tax.
- Tax rates: 40% federal estate tax. 23.8% (20% capital gains plus 3.8% NIIT) if heirs sell carryover-basis shares.
- Rates: the 7520 rate is assumed at 4.8% for illustration. The real figure is set monthly, so check the IRS-published rate for the month you would fund. The IDGT note is interest-only at 4.0% for 9 years.
- Structures: a 2-year zeroed-out GRAT where you survive the term. For the IDGT, a $400,000 seed gift of stock (10%) plus a $3.6 million sale for a note.
- Fees (assumptions, not quotes): gift $1,500, GRAT $9,500, IDGT $40,000 over ten years.
- Death at year 10. "Heirs sell" means they liquidate right away.
Head-to-head: what each option costs and saves at year 10
| Option | Federal estate tax at death | Capital gains if heirs sell | Assumed fees | Net vs. holding (heirs sell) | Net vs. holding (heirs keep shares) |
|---|---|---|---|---|---|
| Hold for step-up | $4,654,280 | $0 | $0 | baseline | baseline |
| Direct gift | $2,800,000 | $1,817,297 | $1,500 | +$35,500 | +$1,852,800 |
| 2-year GRAT | $4,503,435 | $79,359 | $9,500 | +$62,000 | +$141,300 |
| IDGT sale | $3,692,026 | $590,419 | $40,000 | +$331,800 | +$922,300 |
This is the kind of analysis Voritanel runs for you, so you don't have to build the spreadsheet yourself.
Here's how to read the table.
Direct gift. It removes all $4,635,700 of growth from your estate, worth $1,854,280 at 40%. But the heirs inherit your $1 million basis, so a sale triggers $1,817,297 of gains tax. The edge is $36,983 before fees. That's the 40% versus 23.8% collision. For a deeper look at the gift-versus-step-up trade-off, see this 8-year break-even on gifting appreciated stock. The "keep shares" column looks huge, but it ignores the heirs' own estates and assumes they hold until a step-up at their deaths.
IDGT sale. It moves less growth, about $2.4 million, because the 4% note hands value back to you. But the note converts part of the position into assets you hold at death, and those get a step-up. That's why it wins the "heirs sell" column. Many IDGTs also include a swap power so you can buy appreciated assets back before death. Ask your attorney whether yours should.
GRAT. In this example a two-year GRAT leaves only $203,742 in the remainder at year 2, growing to roughly $377,112 by year 10. The annuity in this example is $2,145,124 a year, which zeroes out the trust at a 4.8% hurdle. A rolling series of GRATs, or longer terms, would change the picture. So does mortality: if you die during the term, the assets come back into your estate. For a larger-asset version of this fight, see GRAT vs. IDGT vs. Direct Gift on a $10M Asset.
Holding. It costs $0 in fees, gets a full step-up, and is simple. It also pays the full 40% on everything above the exemption.
Where the answer flips
Growth rate. The direct gift beats holding (when heirs sell) only if growth exceeds $4,407,407 on the $4 million, about 7.7% a year over ten years. Here's the algebra: 0.40 × growth = 0.238 × (3,000,000 + growth).
- At 8%, the gift nets +$36,983 before fees.
- At 6%, the stock reaches $7,163,392. The estate tax saved is $1,265,357 and the gains tax is $1,466,887. The gift loses about $201,500 if heirs sell.
The sign flips between two growth rates that most people can't tell apart in advance.
Filing status and portability. Now make you married, with a timely portability election, so you have about $30 million of combined exemption. The same $22 million estate grows to roughly $26.6 million and owes $0 federal tax. Holding wins outright, and every dollar of trust fees is a pure loss. A single filer under $15 million is in the same boat. Portability is the cheapest "advanced" tool in the box, and plenty of people skip the analysis.
State tax. I assumed none. In a state with its own estate tax and no portability, the answer can reverse. A $9 million estate with $0 federal tax can still owe $947,500 in state estate tax.
You can model this for your specific situation at Voritanel, including the growth rate where your own break-even sits.
The rate lens: jobs, inflation, and the 7520 hurdle
The Bureau of Labor Statistics' Major Economic Indicators page shows consumer prices up 0.4% in August 2026, unemployment at 4.2% in September, preliminary payroll growth of just 29,000, and average hourly earnings up $0.05 (preliminary). Thin hiring tends to argue for lower rates. A 0.4% monthly CPI, which would be about 4.9% annualized if it persisted (1.004¹² − 1), argues for higher ones. One month isn't a trend, and I'm not forecasting.
What matters is the mechanism. The 7520 rate is 120% of the federal mid-term rate, rounded to the nearest 0.2 point. For a GRAT, the rate for the month you fund sets the hurdle. So a move shows up in 0.2-point steps.
Here's what a 0.2-point step does to this GRAT:
| 7520 rate | Annual annuity | Remainder after 2 years (8% growth) |
|---|---|---|
| 4.8% | $2,145,124 | $203,742 |
| 5.0% | $2,151,220 | $191,062 |
That's $12,680 less at year 2, or about $9,400 of estate tax by year 10 at 40%. By comparison, the choice of structure moved the result by roughly $270,000 (IDGT versus GRAT, heirs sell). On a position this size, which option you pick matters about 29 times more than a 0.2-point rate move. On bigger assets and longer terms the rate matters more. For the timing question, see this 5-question framework on funding a GRAT after the Fed's September 16 rate hike.
Seven inputs that decide your answer
- Estate size versus exemption. That includes any portable spousal exemption you've preserved.
- Cost basis. A $1 million basis on $4 million behaves very differently from a $3.5 million basis.
- Growth and horizon. The 7.7% break-even moves with every year you add or remove.
- Whether heirs will sell. This one assumption swings the direct gift by about $1.8 million.
- Your age and health. GRATs depend on surviving the term.
- State estate tax. It can add a second 10% to 16% layer, or none.
- Fees and friction. Trust returns, a grantor-trust income tax bill you pay personally, and attorney time all add up. See what estate planning really costs in 2026.
Annual-exclusion gifts ($19,000 per recipient in 2026) reset every Jan. 1 and don't carry over. They are the one lever here with a hard calendar deadline.
What to do with this
None of the four options is "the answer." In this example, a gift looks great if the heirs hold and risky if they sell. The IDGT wins the sell case but costs the most to run. The GRAT is modest, and holding is hard to beat if you're under the exemption. This is educational, not individual tax advice, so have an estate attorney and CPA confirm anything you act on.
Your basis, growth assumptions, state, and exemption will move these numbers, sometimes by six or seven figures. Voritanel lets you plug in your own inputs and see the tax, fees, and break-even for each option side by side. Do it before the next monthly rate resets, or just before you decide to do nothing.
Sources
- Should U.S. Bank’s New Credit Cards be ‘Essential’ for Your Business? — NerdWallet
- Oct. 6 Is National Taco Day — Here Are the Spiciest Deals — NerdWallet
- Bilt to Reduce Hyatt Transfer Ratio to 4:3 in 2027 — NerdWallet
- Major Economic Indicators Latest Numbers — Bureau of Labor Statistics
- Chase, IHG Add $350-Annual-Fee Card and Overhaul Their 2 Existing Ones — NerdWallet