Sales to Intentional Grantor Trusts


Sales to Intentional Grantor Trusts (IGTs) (sometimes also referred to as "intentionally defective grantor trusts") are an effective estate planning strategy to remove assets from the estate of the senior generation while preserving an income stream from the sale. An IGT is an irrevocable trust that removes assets from the grantor’s taxable estate. This strategy "freezes" the estate of the senior generation by converting appreciating assets into a non-appreciating asset with a fixed yield. The strategy takes advantage of the differences between the estate tax inclusion rules and the separate grantor trust income rules under the Internal Revenue Code ("Code").

A. Description -

The senior generation (grantor) creates an irrevocable IGT that is treated as a grantor trust for income tax purposes. As a result, the grantor will be treated as owning the IGT assets and the trust’s income will be taxed to him.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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