The IRS Sent a $736 Million Bill Over a Popular Trust for the Rich. Estate Lawyers Are Rereading Their Files
The IRS wants $614 million in gift tax and $122 million in penalties from an HCA heiress and her husband over grantor-retained annuity trusts, or GRATs. It says paying the annuities by forgiving portions of her promissory notes broke its GRAT rules; the couple is fighting it in Tax Court.
By Sean Anees Saifi · Capital Wealth · Published Friday, September 25, 2026 · Source: The Wall Street Journal, Tuesday, September 22, 2026 edition, whose market figures are the Monday, September 21 close
Key Points
The IRS is seeking $614 million in gift tax and $122 million in penalties from Chuck and Trisha Elcan of Nashville over grantor-retained annuity trusts (GRATs) holding shares of HCA Healthcare (HCA), the hospital operator Trisha’s father and grandfather helped co-found in 1968.
The fight is over how the annuities were paid: Trisha bought assets from her GRATs with interest-bearing promissory notes, and the trustee paid the annuities owed to her by forgiving portions of those notes. The IRS says that violated its GRAT regulations and treats every transfer to the trusts, even to one that failed, as a taxable gift at 40%.
How a GRAT works: assets go in for a set term, typically two to 10 years, and the grantor takes back annuity payments, at least yearly, that return the contribution plus interest at a special federal rate (5.4% for September). Growth above that rate generally passes to the heirs’ trust free of gift and estate tax, using little or none of the $15 million lifetime exemption; if the assets fall short, the grantor simply gets the money back.
The Elcans contend the notes are consistent with the tax code and regulations, and they’ve moved for summary judgment in Tax Court; their lawyer, John Porter, calls the IRS position draconian. Greenberg Traurig estate lawyer Diana Zeydel disagrees with the IRS but would caution clients against notes for now: “Why put yourself in the crosshairs?”
$736M
the combined tax and penalties the IRS wants
40%
the gift-tax rate applied if the IRS wins
5.4%
September’s hurdle rate a GRAT must beat
$15M
lifetime gift and estate exemption, per person
A GRAT that misses its hurdle just hands the grantor’s money back; the Elcan fight is over how the annuities got paid.
In one line: The IRS isn’t attacking GRATs themselves — it’s attacking one way of paying their annuities, and that distinction is the whole lesson.
Here’s the part nobody frames on a wall: a wealth-transfer tool the rich have used for years runs on a bet against a rate the government publishes monthly. Put appreciating assets in a grantor-retained annuity trust, take back annuity payments that return what you put in plus interest at that rate — 5.4% for September — and whatever the assets earn above it generally passes to your heirs free of gift and estate tax, using little or none of your $15 million lifetime exemption. Lose the bet and you simply get your money back. So the $736 million the IRS is demanding from an HCA heiress and her husband has wealthy families on high alert, Tuesday’s Journal reports.
The agency isn’t calling GRATs illegal; its own regulations govern them. Its fight is over how the annuities got paid. Trisha Elcan bought assets from her GRATs with interest-bearing promissory notes, and the trustee then paid the annuities owed to her by forgiving portions of those notes. The IRS says that violated its GRAT regulations and treats every transfer into the trusts — even into one that failed — as a taxable gift at 40%. The couple says the notes fit both the tax code and the regulations, and they’ve asked the Tax Court for summary judgment; their lawyer, John Porter, calls the IRS position draconian. Meanwhile, Greenberg Traurig’s Diana Zeydel, who disagrees with the IRS, would still steer clients away from notes for now. “Why put yourself in the crosshairs?” she said.
Our read
Almost nobody reading this has a $736 million problem, but the mechanism scales all the way down. Estate planning more often fails at the paperwork layer than at the strategy layer: the trust that was never funded, the beneficiary form that still names an ex-spouse, the annuity payment made late because nobody diaried the date. The Elcans’ strategy was routine; the execution — how the annuities were paid — is what’s on trial. That’s true of a $2 million estate exactly as it’s true of a $2 billion one.
Two practical notes. First, the $15 million exemption is a law with a legislature attached — families who expect to be anywhere near it should plan against the possibility it shrinks, not the hope it doesn’t. Second, if a GRAT, a trust or any estate vehicle is already in your life, this is the season to have someone reread the mechanics — not the intent, the mechanics. Bring the trust documents, not just the statement; the fifteen minutes are for the dates and signatures.
What It Means For Your Portfolio
Hold — strategy intact; execution is what gets audited
No portfolio action — the position here is procedural: wealth-transfer structures work when they’re run exactly by the book, and the book is being reread in Tax Court right now.
General planning principles, not advice for anyone in particular. A GRAT’s magic is arithmetic — asset growth above a published hurdle rate passes free of gift and estate tax — and arithmetic has no mercy for missed formalities. Anyone using GRATs, SLATs, or installment sales to trusts should ask their counsel one question this quarter: are we doing anything the IRS could call a shortcut?
For households below the exemption, the same audit applies at smaller scale: beneficiary designations, trust funding, and the titling of accounts decide what your documents actually do. The strategy on paper and the plumbing in place are two different estates.
