Transferring ownership while retaining control – A GRAT or IDIT can help

Description

Abstract: If a large portion of one’s wealth is tied up in a family business, estate planning goals may conflict with succession-planning goals. Fortunately, there are several trust-based tools that allow the transfer of business interests to successors now — minimizing gift and estate taxes — while maintaining control of the business. Two to consider are the grantor retained annuity trust (GRAT) and a sale to an intentionally defective irrevocable trust (IDIT). This article explains how they work. However, both involve some mortality risk, so a sidebar discusses how a “business intentionally defective irrevocable trust,” or BIDIT, aims to eliminate this risk.