The BDIT – A trust with a twist

Description

Abstract: The beneficiary defective inheritor’s trust (BDIT) is a powerful estate planning tool that allows enjoyment of the benefits of a traditional trust without giving up control over the property. BDITs are particularly effective for assets that have significant appreciation potential or that are entitled to substantial valuation discounts. And, when designed as a “dynasty” trust, a BDIT can provide benefits for future generations without triggering transfer taxes or exposing the trust assets to creditors’ claims. This article offers an example of how a BDIT works. A sidebar discusses how to ensure that it can withstand an IRS challenge.