Succession Planning and Intentional Defective Grantor Trusts

January 3, 2018 by Gordon Advisors

Developing a business succession plan takes savvy and expertise, especially where capital gains taxes are involved. Protecting your estate for your beneficiaries is also often a big concern, but there are ways to do that if you understand the options.

One tool that has become popular recently is the use of an Intentional Defective Grantor Trust (IDGT). The IDGT is trending for the transition of a business because, for income tax purposes, it is taxed to the individual.

On the other hand, for estate purposes the business is not included in the individual’s gross estate. The business is sold to the trust for a loan and is no longer part of the estate. The loan is included in the estate; however, appreciation on the business is out of the estate. This can be a complex yet effective tool, but should be structured by a certified financial planner with experience setting up IDGTs.

Gordon Advisors has this expertise and can explain how to best design an IDGT to fit your business succession plans and your estate planning goals. Call your CPA who specializes in estates and trusts to learn more.