Sep 1, 2005 12:00 PM, By Bruce D. Steiner, attorney, Kleinberg, Kaplan, Wolff & Cohen, P.C., New York

By: By Bruce D. Steiner, attorney, Kleinberg, Kaplan, Wolff & Cohen, P.C., New York

Much has been written about the intentionally defective grantor trust (IDGT). Transfers to an IDGT are completed gifts for gift tax purposes; and the IDGT is not included in the grantor's estate for estate tax purposes. The IDGT is treated as a grantor trust for income tax purposes; and the grantor's payment of the income tax on the trust's income is not treated as an additional taxable gift by the donor.¹

But there's a useful technique that is the opposite of the IDGT, one that I call the “Accidentally Perfect Non-grantor Trust” (APNT).² Transfers to an APNT are not treated as completed gifts for gift tax purposes. The APNT is included in the grantor's estate for estate tax purposes. However, the APNT is a separate taxpayer for income tax purposes.

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