After working all of your life to create and expand your family business, it is unlikely that you are willing to relinquish control easily, or allow it to fail after you die. Nevertheless, there will come a time when you will need to relinquish control to the next generation. Before this happens, you will need to make the decision about whether you want your business to continue on after your death. If you do not wish it to continue, then you can stop reading; if you would like it to continue to thrive, then keep reading and learn about an important estate planning tool that you should consider.
When it comes to estate plans, three of the biggest causes of problems are taxes, economics, and human emotions. A really good way of circumventing these problem creators is by using an intentionally defective grantor trust (IDGT). An IDGT is a complex, irrevocable trust that allows you, the grantor, to utilize the Internal Revenue Code (IRC) to your advantage by making use of certain tax loopholes. These tax loopholes allow you to transfer assets into the trust, which removes the value of those assets from the calculation of your gross estate; thus, the amount of estate taxes assessed against your estate will be lower. The “defective” aspect of the IDGT is what keeps the trust in compliance with the IRC, since it still requires you to pay income taxes on the assets that are transferred.