An Intentionally Defective Grantor Trust (IDGT) is a unique estate-planning tool that allows you to separate and isolate certain trust assets. It's a way to split assets, separating income tax from estate tax. Many people go to a trusts lawyer to find ways to reduce taxable estate after their death. An IDGT is one option that benefits children, grandchildren and other family members.

Intentionally Defective Grantor Trust Basics

At its core, an IDGT is a type of irrevocable trust. It's effectively a grantor trust, but built-in and intentional loopholes provide additional perks.

In estate planning, these trusts help freeze specific assets. The goal is to remove those assets from a grantor's estate. The grantor still has to pay taxes on the trust's income. But the removed assets are no longer part of the estate. As a result, it lowers the individual's taxable estate. That can be advantageous for beneficiaries when the grantor dies. Protect your assets and secure your family's future with the help of an experienced trusts lawyer. Visit this website now to schedule a consultation and get started!

However, an IDGT allows you to gift assets to people during the grantor's lifetime at a locked-in rate. It's a great technique for protecting highly appreciated assets. A grantor can also grant beneficiaries extra wealth by paying income tax on the trust assets.

The term "defective" represents the grantor's need to pay the trust's income tax during their lifetime. They must cover the tax liability. It's "effective" for estate taxes, but the trust's income taxes still apply.

Why Create an IDGT?

There are many advantages to having an IDGT.

The biggest is to provide beneficiaries with as much as possible. With an IDGT, beneficiaries benefit from appreciation. But, they don't have to pay additional transfer tax upon the grantor's death.

Another perk is that it reduces the overall taxable estate. The IDGT can remove high-value assets from the estate and transfer them to an irrevocable trust.

There's a lot to gain from having an IDGT, but setting one up is a complex process. If you're looking for estate-planning tools to benefit you and your beneficiaries, meet with a trusts lawyer. They understand the complexities of the law and can find solutions that meet your needs.

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