Estate planning / tax question (lawyers, CPA's help!)

I think I found something too good to be true. My non-legal reading of the document seems to say that you can avoid all gift, income and estate taxes to all parties by setting up an IDGT. In fact, my father could use it as a tax-free stream of income because the trust is paying him interest on the “note.”

It seems like the ultimate tax loophole.

So what’s the catch? Why wouldn’t everyone use this not only for estate planning, but for general savings?

Umm, “trusts” are EXTEMElY complex, and do not go into them without signed advice from an attorney or CPA. For Estate, yes- this sort of thing CAN be done- if done right, in certain circumstances. if your Dad has a net trust over a Mil, (or maybe twice that if his wife is getting her half)- then, yes- he should certainly seek professional long term estate tax planning (which may be moot in a few months, if GWB has his way).

As for getting out of income tax- there are some trust promoters that will tell you that they can be used to reduce income tax to nothing, or close to it. In the trade, these folks have a technical term: “crooks”.

Thanks Daniel…that is good advice for everyone out there. However, I am a financial consultant, and just stumbled, and as part of my job, I help people plan their estates (a lawyer just puts the rubber stamp on it to make it legal). I just stumbled upon this kind of trust yesterday and it seems at first glance to offer complete tax evasion. I was hoping that a lawyer/estate attorney could explain what the catch is, because it sounds too good to be true.

It is too good to be true. Assets that have evaded taxation in such a trust may be subject to recapture.

BTW. If you are a series seven licensed representative, it is unlawful for you to identify yourself as such within the context of an open, chat or message board, as it may be construed as a solicitation. As it is an open forum, such a solicitation may be read and acted upon by parties who do not reside in locales in which you have been licensed to conduct business. Thought you might want to know.