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Intentionally Defe ctive Gran tor Trus ts What Is An Intentionally Defective Grantor Trust? A "Grantor Trust" is a trust that runs "afoul" of the rules contained in Sections 671.

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To fund intentionally defective grantor trusts, grantors have two options: make a completed gift to the trust or engage in an installment sale to the trust. A completed gift. Gifts are the most common way to fund an IDGT. The grantor makes an irrevocable, completed gift of the desired assets to the trust.

The basis of appreciated assets held in an IDGT is not stepped-up upon the death of the grantor, notwithstanding the fact that the grantor is treated as the owner of those assets for income tax purposes.

An intentionally defective grantor trust is a trust that attempts to shift the burden of taxation on the trust assets. Normally, the trust itself or the beneficiaries must pay taxes on the trust's income. However, a defective trust allows the trust maker to pay these bills for the benefit of all parties.

When a grantor is considered an owner of the trust for income tax purposes but has relinquished rights to the assets in the trust in a way that allows the grantor to not be considered the owner of the assets for estate tax purposes, this is called an Intentionally Defective Grantor Trust.

The GRAT requires an annual annuity payment. Assuming comparable time periods, the IDGT offers substantially more opportunity to build cash in the trust until the final lump sum payment is due. Interest – Though the two trusts are similar, they use different minimum interest rates.

For example, a client owns a business valued at $50MM, and has their entire 2021 lifetime gift exemption available ($11.7MM). If they choose to gift their maximum allowable amount to an IDGT, without discounts, they will have shifted approximately 23% of their business to the trust ($11.7MM/$50MM).

An Intentionally Defective Irrevocable Trust (IDIT) is a trust that contains certain provisions set forth in the Internal Revenue Code, which imputes the income to the Grantor as the creator of the trust, but excludes the trust assets from the Grantor's estate for estate tax purposes.

An Intentionally Defective Irrevocable Trust (IDIT) is a trust that contains certain provisions set forth in the Internal Revenue Code, which imputes the income to the Grantor as the creator of the trust, but excludes the trust assets from the Grantor's estate for estate tax purposes.

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© Copyright 1997-2025
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Form Packages
Adoption
Bankruptcy
Contractors
Divorce
Home Sales
Employment
Identity Theft
Incorporation
Landlord Tenant
Living Trust
Name Change
Personal Planning
Small Business
Wills & Estates
Packages A-Z
Form Categories
Affidavits
Bankruptcy
Bill of Sale
Corporate - LLC
Divorce
Employment
Identity Theft
Internet Technology
Landlord Tenant
Living Wills
Name Change
Power of Attorney
Real Estate
Small Estates
Wills
All Forms
Forms A-Z
Form Library
Customer Service
Terms of Service
DMCA Policy
About Us
Blog
Affiliates
Contact Us
Privacy Notice
Delete My Account
Site Map
All Forms
Search all Forms
Industries
Forms in Spanish
Localized Forms
Legal Guides
Real Estate Handbook
All Guides
Prepared for You
Notarize
Incorporation services
Our Customers
For Consumers
For Small Business
For Attorneys
Our Sites
US Legal Forms
USLegal
FormsPass
pdfFiller
signNow
airSlate workflows
DocHub
Instapage
Social Media
Call us now toll free:
1-877-389-0141
As seen in:
  • USA Today logo picture
  • CBC News logo picture
  • LA Times logo picture
  • The Washington Post logo picture
  • AP logo picture
  • Forbes logo picture
© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232