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  • The Case For An Intentionally Defective Grantor Trust - The Tax Adviser

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See the following schematic for a typical IDGT. Marty Sylvia Real Estate Property 7 Million Installment Payment to Marty and Sylvia of 266 175 a year. 5 Million Life Insurance 7. 0 Million Real Cash Flow of 420 000 from Confusing Sure the previous schematic is confusing as are the many other schematics that can be created when illustrating how an IDGT can benefit clients and their heirs.

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An intentionally defective grantor (IDGT) allows a trustor to isolate certain trust assets in order to segregate income tax from estate tax treatment on them. It is effectively a grantor trust with a purposeful flaw that ensures the individual continues to pay income taxes.

The IDGT lets you transfer assets outside of your estate, which lets you avoid paying estate and gift taxes on the assets. The IDGT gets its defective name from its structure, which is an intentional flaw designed to provide tax benefits for the trust grantor the person who creates the trust and their beneficiaries.

When grantor trust status applies, either the grantor or a beneficiary is treated as the owner of the activity inside the trust for income tax purposes. ... The general rule is that all grantor trusts must file a Form 1041, which contains only the trust's name, address, and tax identification number (TIN) (see Regs. Sec.

What Is an Intentionally Defective Grantor Trust? ... The intentionally defective trust 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.

According to the tax laws, IRC §671-679, a grantor trust is any trust in which the Trustor/Grantor retains control over the income or principal, or both to such an extent that he is regarded as the substantial owner of the trust property and income. ... Thus, a grantor trust does not typically file any income tax return.

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 one key thing that all parties should be aware is that the IRS does not require or recommend obtaining an EIN/Tax ID Number for Grantor Trusts. The client can use their own social security number when they open the account, because income from the account is to be reported on the individual income tax return of ...

The most common powers that are retained by the grantor and thus make the trust defective for income tax purposes include: Designating the grantor's spouse as a trustee and granting such trustee authority to add beneficiaries (Sec. 674(a));

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© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232
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