Intentionally Defective Grantor Trust

• Category: Trusts
• State: Multi-State
• Control #: US-13409518
• Format: Word; Rich Text

Description Intentionally Defective Grantor

An intentionally defective grantor trust is an estate-planning tool that is used to freeze certain assets of an individual for estate tax purposes, but not for income tax purposes. It is created as a grantor trust with a loophole that allows the trustor to continue paying income taxes on certain trust assets, as income tax laws will not recognize that those assets have been transferred away from the individual. Because the grantor must pay the taxes on all trust income annually, the assets in the trust are allowed to grow tax-free, and thereby avoid gift taxation for the grantor’s beneficiaries. Thus, it is a loophole used to reduce estate tax exposure. This form contains some alternate provisions that the user may modify to suit the particular desires and needs of the grantor. An Intentionally Defective Granter Trust (IDG) is an irrevocable trust created for estate planning purposes with the intention of shifting income and assets from the granter to beneficiaries while minimizing gift and estate taxes. The granter, who is also the trustee, maintains control over the trust assets and has the legal right to revoke the trust. The granter is also responsible for paying the trust's income taxes, which are reported as part of the granter's taxable income. The main types of Its include granter retained annuity trusts (Grants), qualified personnel residence trusts (Parts), and charitable lead trusts (Cuts). Grants are established to transfer assets to beneficiaries for a set period of time while minimizing the gift or estate tax burden. Parts allow the granter to transfer a personal residence to a trust while retaining a life estate and minimizing the gift or estate tax burden. Cuts are created to transfer assets to a charity for a set period of time while also transferring assets to beneficiaries after that period and minimizing the gift or estate tax burden.

An Intentionally Defective Granter Trust (IDG) is an irrevocable trust created for estate planning purposes with the intention of shifting income and assets from the granter to beneficiaries while minimizing gift and estate taxes. The granter, who is also the trustee, maintains control over the trust assets and has the legal right to revoke the trust. The granter is also responsible for paying the trust's income taxes, which are reported as part of the granter's taxable income. The main types of Its include granter retained annuity trusts (Grants), qualified personnel residence trusts (Parts), and charitable lead trusts (Cuts). Grants are established to transfer assets to beneficiaries for a set period of time while minimizing the gift or estate tax burden. Parts allow the granter to transfer a personal residence to a trust while retaining a life estate and minimizing the gift or estate tax burden. Cuts are created to transfer assets to a charity for a set period of time while also transferring assets to beneficiaries after that period and minimizing the gift or estate tax burden.