Intentionally Defective Grantor Trusts: Asset Transfer Planning Strategies and Form 1041 Reporting Compliance

This course will provide tax professionals with a detailed review of the advantages and applications of intentionally defective grantor trusts (IDGTs), tax planning approaches that utilize IDGTs, and related tax compliance. Our panel of wealth transfer professionals will discuss new IDGT considerations after the enactment of OBBBA, including the permanency of and increase in the estate tax exclusion.

Taxpayers and advisers create IDGTs pursuant to IRC Sections 671-678 to freeze values for estate tax purposes while transferring assets from the estate free of gift tax. Like other properly structured and administered irrevocable trusts, IDGTs might protect the trust assets from claims by creditors and former spouses.

Set up correctly and based on current law, gifts or sales to these trusts can tax-efficiently pass net worth to future generations. However, trust powers must be carefully selected and understood to avoid an incomplete gift and unintentional inclusion of income in the grantor's estate.

While IDGTs offer significant tax benefits, estate planning tax advisers and counsel must be aware of potential pitfalls associated with IDGTs. These pitfalls include potential recognition of deferred gains in the case of early death and legislative uncertainty related to IDGT planning techniques.

Listen as our authoritative panel of estate planning tax advisers and counsel discusses best practices for maximizing the benefits of IDGTs and overcoming compliance challenges on Form 1041.