A grantor initially seeds an IDIT with cash or property that creates a taxable gift.
An IDIT enhances wealth transfer opportunities, because it allows a grantor to discount assets transferred or sold due to lack of marketability or a minority interest, which reduces the assets' fair market value (FMV), the amount of the taxable gift and the promissory note.
* Initial cash or property used to seed an IDIT is a taxable gift.
A grantor "seeds" an IDIT with cash or property that creates a taxable gift.
With an IDIT, a grantor can discount assets transferred or sold due to lack of marketability or a minority interest, reducing their fair market value, the taxable gift and the promissory note.
The uncertainty of repeal, coupled with the turbulent times, however, make an IDIT a viable estate planning tool.
An IDIT is a trust that has one or more of the powers described in IRC secs.
The primary purpose of an IDIT is to shift income ownership and related tax burden and attributes back to the grantor, while preserving the completed gift characterization for estate and generation-skipping transfer taxes.
Creating an IDIT shifts the tax burden back to the grantor, who pays less tax than the trust due to the differences in the income tax brackets.
A common technique that has gained in popularity in recent years is the sale of an asset to an intentionally defective irrevocable trust (IDIT), a grantor trust created by the seller.
The installment sale of property to an IDIT is an estate-freezing technique similar to a GNAT, but takes advantage of the differences between the estate tax rules and the income tax rules governing property ownership.
The primary benefit of making an installment sale to an IDIT is that, to the extent the assets generate more than the applicable interest rate in combined income and appreciation, such excess will pass to the trust beneficiaries transfer tax-free.