An intentionally Defective Grantor Trust (IDGT) is an irrevocable trust that is a completed gift for estate tax purposes but incomplete for income tax purposes. It is drafted as a Grantor trust so that the income derived from the trust is taxed at the grantor’s tax rate (instead of the compressed trust rates), but the income, and eventually the principal, is left to designated beneficiaries. The income generated therefore goes gift-tax free to beneficiaries. Assets can also be sold to an IDGT in exchange for a promissory note. The sale is not recognized as a taxable event because of the grantor trusts status. The assets are thereby removed from the estate without using any gift tax. Annually the IDGT pays interest payments to the grantor at the applicable federal rate (AFR) established by the IRS. Often IDGTs are combined with LLC interests when businesses are involved and especially for valuation discounts. A big draw is the expectation that the assets will grow within the IDGT and thus that growth is transferred to beneficiaries’ tax free.