D is our hero. D has about $100,000,000 in assets. D has private equity interests, both volatile and safe stocks, muni bonds and cash in Ds portfolio. D expects the Private equity interest to grow at about 30%, but realizes it might go to 0 as well. The volatile stocks are expected to grow at a 20% annual rate, but could also go down in value by 20%. The safe stocks could grow or decrease at a 10% annual rate and the muni bonds are certain to grow at 7%. The cash will grow at 1%. D would like to try to get assets out of Ds estate, without paying any gift tax (or as little as possible). D has been thinking about a GRAT for this purpose and is willing to put $10,000,000 of Ds assets in the GRAT. Assume the interest rate is 10% annually.

1. What would be the gift / estate tax consequence / benefit if D created a 3-year GRAT funded with volatile stocks (that grew 20% per year, net of tax) and the annuity amount was $3,000,000 payable at the end of each year (i.e. in Year 1 of 3 the trust would earn $2,000,000 (to $12,000,000) and then there would be a $3,000,000 payment. In Year 2, the GRAT would earn $1,800,000 (to $10,800,000) and then pay the $3,000,000 payment (to $7,800,000) and in Year 3 the trust would earn $1,560,000 to $9,360,000, before the final payment of $3,000,000)?