Sale to an IDIT for a Promissory Note –The Best Estate Planning Strategy (Gimmick) Going
Michael D. Mulligan will present a session at 2022 Society of Trust and Estate Practitioners (STEP) of Orange County Institute Annual Conference. His program discusses the sale to a so-called intentionally defective irrevocable trust (an “IDIT”) in exchange for a promissory note as an estate planning strategy. Because an IDIT is ignored for income tax purposes, its grantor may sell appreciated assets to the IDIT without recognizing gain. Future increase in the value of those assets is eliminated from the grantor/seller’s estate (an “estate freeze”). Because the grantor/seller remains individually liable for taxes on income generated by assets sold to the IDIT, a sale can not only produce an “estate freeze,” but can actually produce a reduction in the value of the grantor/seller’s estate. Variations of the standard sale are discussed, such as a sale for an annuity payable for the grantor/seller’s life and a sale to a so-called beneficiary intentionally defective trust (a “BIDIT”).
