What Is A BDIT?

by Bruce Givner on January 5, 2012

A “BDIT” stands for “beneficiary defective inter vivos trust” or “beneficiary defective inheritor’s trust.” The basic idea is that the client does not establish the trust. Instead, the trust is set up by a trusted third party, such as the client’s parents for the benefit of the client. The client is then able to be the beneficiary and the trustee. The parent contributes a nominal amount of money, for example $10,000 to the trust, and gives the client the ability to withdraw that amount using a Crummey (annual withdrawal power).  Since the client refuses to exercise the right to withdraw, the client becomes the “owner” of the trust for income tax purposes, but not for estate tax purposes.

The client, as beneficiary, sells valuable assets to the BDIT in exchange for a promissory note at full fair market value. As a result, the valuable asset is in a trust which is protected from creditors. Since the trust was not created by the client, transfers to the trust are not subject to the normal statute of limitations on fraudulent transfers (2 years in Nevada, 4 years in California and virtually every other state).

A BDIT can be a useful structure for people who wish to achieve asset protection planning but do not have the ability to give up access to and control over their valuable assets. It also has advantages over other techniques, such as a domestic asset protection trust. In future blogs we will discuss the advantages and uses of BDITs.

Find out what Givner & Kaye can do for you. Contact us today. www.GivnerKaye.com (310) 207-8008

{ 2 comments… read them below or add one }

Brian Bonnema September 9, 2013 at 8:37 pm

Please send additional information on the BDIT, and projected cost to set-up

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Brian Bonnema May 16, 2014 at 9:24 am

Please send addition on a BDIT

Reply

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