IDIT

IDITs are often used to remove appreciating property from an estate. This is accomplished by selling property to a trust that is "Irrevocable" for transfer tax purposes, but that is "defective" for income tax purposes.

An IDIT is an irrevocable trust in which the grantor sells property to the trust in exchange for an installment note. For estate planning purposes, at the death of the grantor only the fair market value of the installment note is included in the grantor’s estate. The trust property is not "stepped-up" in basis at the grantor’s death.