Structuring Intentionally Defective Grantor Trusts Under Current Tax Law

This CLE course will provide estate planners with a comprehensive and practical guide to critical considerations and pitfalls to avoid in structuring intentionally defective grantor trusts (IDGTs). The panel will discuss navigating the tax treatment and fiduciary requirements for defective trusts upon the trustor's death, income allocation rules, post-mortem asset transfer strategies, and tax reporting requirements for defective grantor trusts.

For most taxpayers, estate planning should focus on income tax efficiency while also maximizing the estate tax exemption.

IDGTs, when structured correctly, are very effective for transferring assets and property that will likely appreciate to beneficiaries because they allow the grantor to sell or transfer assets to the trust without recognizing a gain. The sale of an asset to an IDGT is not considered a gift event that would trigger gift taxes, and the sale is not considered a taxable event that would trigger any capital gains tax. Also, the sale accomplishes the removal of the asset from the taxable estate. IDGTs offer benefits, but they are not without risks, including potential changes to the grantor trust rules that practitioners should advise their clients of.

Listen as our authoritative panel of estate planning counsel discusses best practices for determining which clients and assets can most benefit from IDGTs, maximizing the tax advantages, and avoiding the pitfalls associated with this technique.