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Beneficiary Defective Irrevocable Trusts: Structuring BDIT, Minimizing Tax, Control Over Assets, Pitfalls to Avoid

Recording of a 90-minute CLE/CPE video webinar with Q&A

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Conducted on Tuesday, July 30, 2024

Recorded event now available

or call 1-800-926-7926

This CLE/CPE webinar will provide a comprehensive and practical guide to structuring a beneficiary defective irrevocable trust (BDIT). The panel will identify circumstances in which BDITs are an optimal strategy, properly drafting the BDIT to avoid adverse tax consequences, structuring sales/loans to BDITs, incorporating Crummey powers into the instrument, and other key considerations when structuring a BDIT.

Description

A BDIT can provide significant estate and tax planning opportunities for clients under the right circumstances. BDITs allow a beneficiary to form assets while also maintaining control and protecting assets from estate taxes, creditors, and other claims. Trusts and estates counsel must understand the circumstances where BDITs will provide the best benefits to clients, key drafting considerations, and related tax implications.

BDITs are irrevocable trusts used to move appreciating assets outside of a client's estate to protect against creditors and provide potential tax savings. Provisions are included when structuring a BDIT to ensure that the trust qualifies as a grantor trust with the beneficiary being the owner of the trust assets for income tax purposes. In addition, certain transactions with BDITs can be utilized to minimize income taxes, transfer appreciating assets, and reduce estate and transfer taxes for beneficiaries.

Trusts and estates counsel must recognize key issues and pitfalls to avoid regarding (1) securing the shifting of appreciation and income tax burn, (2) structuring the sale of assets to BDITs, (3) creditor protection, and (4) administrative requirements when structuring and utilizing BDITs.

Listen as our panel discusses circumstances in which BDITs are an optimal strategy, properly drafting the BDIT to avoid adverse tax consequences, structuring sales/loans to BDITs, incorporating Crummey powers into the instrument, and other key considerations when structuring a BDIT.

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Outline

  1. Mechanics of BDITs; benefits and risks
  2. Structuring BDITs; key provisions
  3. Income tax considerations
  4. Sales and loans to BDITs
  5. Common challenges and mechanisms to avoid them

Benefits

The panel will discuss these and other key issues:

  • What items must be considered when utilizing a BDIT?
  • What are the key provisions when drafting BDITs?
  • How can BDITs minimize adverse tax consequences?
  • How to shift appreciation and income tax burn
  • What are the key considerations when structuring a sale or loan to a BDIT?
  • Best practices for trusts and estates counsel

Faculty

DiPietro, Samuel
Samuel M. DiPietro
Associate
Spencer Fane

Mr. DiPietro collaborates with families and their advisors to create customized estate plans that consider the specific...  |  Read More

Quintero, Jessica
Jessica Quintero
Partner
Harrison

Ms. Quintero advises clients on complex estate and wealth planning, estate and trust administration, and business...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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