Intentionally Defective Grantor Trust (IDGT) Template

What Is the Intentionally Defective Grantor Trust Template?

An IDGT is an irrevocable trust that's intentionally structured to fail certain IRS tests—creating grantor trust status for income tax purposes while excluding assets from your estate for estate tax purposes. You pay income taxes on the trust's earnings, which depletes your taxable estate without making additional gifts. Meanwhile, assets inside the trust appreciate and pass to beneficiaries free of estate tax.

The most common strategy involves gifting seed capital to the trust, then selling appreciating assets like a business or investment portfolio to the trust in exchange for a promissory note at the IRS minimum interest rate. The spread between that rate and actual returns passes tax-free to your heirs. This template includes comprehensive provisions for both pure gifting strategies and installment sale transactions.

 

Is This Intentionally Defective Grantor Trust Template Right for You?

You need this agreement if you're:

• Planning to sell a business or investment assets to a trust
• Looking for estate freeze strategies for high-value property
• Establishing dynasty trusts for multiple generations
• Coordinating installment sales with your estate plan
• Transferring appreciating assets while minimizing gift tax
• Building wealth transfer structures for family legacy planning

You definitely need this agreement if:

• Your estate exceeds the federal estate tax exemption
• You own rapidly appreciating business interests or real estate
• Current gift tax rates make outright transfers unaffordable
• You want creditor protection for transferred assets
• Your attorney quoted $8,000-$15,000 for custom IDGT drafting

 

 

Why Thousands Trust Legal GPS Templates

Save Money. Estate planning attorneys charge $8,000-$20,000 to draft a custom IDGT with installment sale provisions. Our template costs $35.

Save Time. Get your trust agreement immediately instead of waiting weeks for attorney drafting and revision cycles.

Look Professional. Traditional legal formatting with comprehensive articles that banks and financial institutions will accept without question.

Keeps You Out of Court. Our Grantor Trust Status Provisions and Estate Tax Exclusion Provisions include the specific language needed to satisfy IRS requirements and survive audit scrutiny.

 

 

Get Protected in 3 Simple Steps

Step 1: Secure Checkout. Purchase securely with any major credit card. You'll receive instant email confirmation with download instructions.

Step 2: Instant Download. Download your fully customizable template in Microsoft Word format. Open it in Word, Google Docs, or any compatible editor.

Step 3: Fill In the Highlighted Fields. Complete the bracketed guidance sections, select your preferred options from the multiple-choice provisions, and customize distribution standards to match your estate planning goals.

 

Frequently Asked Questions

Can I use this template multiple times?

Yes. Your purchase includes unlimited personal use rights. Use it for your own estate planning needs, modify it as your situation changes, or create multiple IDGTs for different asset classes.

Is this contract legally binding?

Yes. This template contains all provisions required for a valid and enforceable intentionally defective grantor trust under federal tax law and state trust law. Financial institutions, attorneys, and the IRS will recognize this as a properly formed trust agreement.

Do I need an attorney to use this template?

We strongly recommend working with an estate planning attorney when creating an IDGT due to the complex tax implications. This template provides the legal structure, but proper execution requires coordination with your overall estate plan, accurate asset valuation, and correct tax reporting. Think of this template as the foundation that saves you thousands in drafting fees.

What's the difference between an IDGT and a regular irrevocable trust?

An IDGT is intentionally structured to be "defective" for income tax purposes (you pay the taxes) while being complete for estate tax purposes (assets excluded from your estate). Regular irrevocable trusts are usually separate taxpayers. The IDGT strategy provides estate tax savings that regular trusts don't offer.

How much should I gift as seed capital before doing an installment sale?

The IRS expects the trust to have meaningful equity—typically 10% of the sale price. If you're selling a $5 million business, you should gift at least $500,000 first. Without adequate seed capital, the IRS might challenge the sale as a disguised gift.

Can I change the trust after I create it?

The trust is irrevocable, meaning you can't change beneficial interests or major provisions. However, the template includes limited amendment power for administrative changes like correcting errors, updating for tax law changes, or changing the governing law if you move states. You can also "toggle off" grantor trust status if circumstances change.