An intentionally defective grantor trust (IDGT) removes future appreciation from your estate entirely, often paired with a promissory note sale that freezes the asset’s value for estate tax purposes. A grantor retained annuity trust (GRAT), by contrast, transfers appreciating shares at minimal gift-tax cost while you receive annuity payments back over a set term; if you survive the term, the remaining appreciation passes to beneficiaries tax-free. IDGTs are better for removing large amounts of future growth, while GRATs suit founders who want to retain some economic benefit during the trust term.
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