Using Beneficiary Guarantees in Defective Grantor Trust
- Topics:
- Regulatory issues
- Tags:
- Finance,
- Financial Planning,
- Free Trade,
- Jones Day Reavis & Pogue,
- Personal Finance,
- Risk,
- Taxes
- Source:
- Jones, Day, Reavis & Pogue
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Overview: Providing a bona fide guarantee by the IDGT beneficiaries instead of “old and cold” funding by the grantor can have significant advantages without adding appreciably more risk to what is admittedly an already high-risk technique. For the appropriate client, the possible income, gift, estate, and generation-skipping tax savings usually will be worth the risk. Much has been written about the use of an installment sale to an intentionally defective grantor trust (IDGT). Some commentators have criticized the technique, but many more have praised the potential tax savings of the tool. An IDGT is a comparatively high-risk/high-reward estate planning vehicle, both from a tax and financial perspective. Prudent planning, drafting, and appraising, as well as operating consistently with the well-drafted documents, can mitigate but not eliminate the tax risks so that they should be acceptable to a risk-tolerant grantor.
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Format: PDF | Size: 88KB | Date: Jan 2003 | Pages: 17
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