IDGT
Intentionally defective grantor trust — irrevocable for estate tax (assets out of estate) but grantor trust for income tax so grantor pays income tax (economic gift to beneficiaries).
| Facet | Detail |
|---|---|
| Also called | Intentionally defective grantor trust, grantor trust sale trust |
| A-B / A-B-C role | None |
| When created | During life |
| Revocable | No |
| Inter vivos / testamentary | Inter vivos |
| Typical beneficiaries | Descendants or family members |
| Primary purpose | Estate freeze; sell assets to trust for note without income tax on sale |
| Marital deduction | No |
| Uses estate exclusion | Gift on seed gift; appreciation out of estate |
| In survivor's estate | No |
| Basis step-up | Carryover on sold assets |
| Income tax | Grantor trust |
| Crummey powers | No |
| GST / dynasty | Often combined |
| Spendthrift | Yes |
| See-through (IRA) | Not typical |
| Key tradeoff | Estate freeze vs complexity and grantor's ongoing income tax bill |