A sale to an IDGT is a tax-efficient way to transfer future appreciation of an asset Intentionally Defective Grantor Trust (“IDGT”)
e Grantor makes arm’s length sale of assets to an irrevocable trust
e Grantor receives a note for the fair market value of the asset plus interest at current AFR
e Grantor pays income taxes generated by trust assets
e After the note is paid, remaining trust assets pass to heirs gift tax free
e Additional considerations — trust should be “pre-funded” by grantor to provide sufficient coverage for the note — having the loan guaranteed by trust beneficiaries may be beneficial — advisable to allocate GST exemption to trust in order to maximize benefit to heirs
J.P Morgan i
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