IDGT stands for which type of trust?

IDGT stands for which type of trust?

• A. Intentionally Defective Grantor Trust
• B. Irrevocable Designated Grantor Trust
• C. Integrated Deferred Gift Trust
• D. Insurance-Driven Grantor Trust

Answer: (A)

Intentionally Defective Grantor Trust is a setup where the trust is treated as a grantor trust for income tax purposes, but it is designed to be outside the grantor’s estate for estate tax purposes. In practice, the grantor pays the taxes on the trust’s income, yet the trust’s assets are not included in the grantor’s estate. This arrangement lets assets grow inside the trust and pass to beneficiaries with favorable transfer taxes, while the grantor’s tax payments don’t undo the wealth transfer the trust is meant to achieve. The other terms aren’t standard names for this structure. They don’t describe the same income-tax versus estate-tax treatment mix that defines an intentionally defective grantor trust.

Intentionally Defective Grantor Trust is a setup where the trust is treated as a grantor trust for income tax purposes, but it is designed to be outside the grantor’s estate for estate tax purposes. In practice, the grantor pays the taxes on the trust’s income, yet the trust’s assets are not included in the grantor’s estate. This arrangement lets assets grow inside the trust and pass to beneficiaries with favorable transfer taxes, while the grantor’s tax payments don’t undo the wealth transfer the trust is meant to achieve.

The other terms aren’t standard names for this structure. They don’t describe the same income-tax versus estate-tax treatment mix that defines an intentionally defective grantor trust.