Intentionally Defective Grantor Trust (IDGT)

A trust that is used to freeze assets for the purpose of estate taxes, but not income taxes. The grantor of an IDGT sells assets that are expected to appreciate in value to the trust in exchange for a promissory note, so that the assets in the trust are not included in the estate. The grantor still has to pay income taxes on the trust, but the assets in the trust are allowed to grow for the benefit of the grantor’s heirs without being subject to estate tax.