Grantor Trusts and Intra-Family Loans: A Primer

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Pairing a loan with an intentionally defective grantor trust is a classic wealth-transfer technique. Here's the shape of it.

Sales and loans to intentionally defective grantor trusts (IDGTs) let families freeze the value of an asset in the estate while future appreciation grows outside it. The grantor lends to the trust at the AFR; the trust's growth above that rate passes to beneficiaries free of additional transfer tax.

The mechanics reward precision: the note must be real, the rate must meet the AFR, and payments must be tracked. This is where structure matters most - sophisticated strategies fail on sloppy administration, and clean, automated record-keeping is what makes them defensible.