IDGT

An IDGT, or Intentionally Defective Grantor Trust, is an advanced estate planning strategy most commonly used by high net worth or ultra-high net worth individuals. 

Essentially, an IDGT is an irrevocable trust structured to allow certain assets to be passed on without being subject to estate taxes while still retaining the settlor’s liability for income taxes generated within the trust.

Unlike a standard irrevocable trust, an IDGT is structured as a “grantor trust,” allowing the settlor to be treated as the owner of the assets for income tax purposes. This intentionally defective grantor trust tax reporting feature is what makes it “defective” for income tax purposes, allowing clients to preserve the assets in the trust and instead use assets subject to estate tax for the payment of the income tax. 

IDGTs are commonly used by clients who own highly appreciating or fast-growing assets such as real estate, stocks, or a business that they want to pass on to future generations. The benefits of using an IDGT in estate planning are numerous.

Learn more about IDGTs, how they work, and who they can benefit here.