Why is the 10% seed gift important?

Seeding the trust with independent capital equal to roughly 10% of the note value establishes economic substance and prevents the IRS from asserting retained interest under IRC § 2036.

Updated: August 2026 • Verified v1.2

IDGT Promissory Note Installment Sale Calculator (Rev. Rul. 85-13)

Finance & MathNew

Local Browser Execution: Your input is processed locally in your browser and is not sent to UTL servers.

Trust_Equity_N = Asset_0 * (1 + g)^N - Note_Payoff; Estate_Tax_Saved = Trust_Equity_N * 40%

Was this calculation helpful?

Understanding Your Results

Generates a comprehensive year-by-year amortization schedule, interest payments, grantor income tax burn, and projected federal estate tax savings.

Practical Guidance & Next Steps

Under Rev. Rul. 85-13, transactions between the grantor and trust are disregarded for income tax purposes, allowing tax-free asset sales and income tax-free promissory note interest.

What is this?

A high-net-worth estate planning calculator that analyzes asset sales to an Intentionally Defective Grantor Trust (IDGT) funded with an AFR promissory note.

How does it work?

1. Enter asset value, seed gift percentage (typically 10%), and expected growth rate. 2. Choose note term and IRS Applicable Federal Rate (AFR). 3. Toggle grantor income tax burn to calculate compounding trust growth and estate tax savings.

Why use it?

Demonstrates the profound wealth transfer leverage of freezing estate assets at low AFR interest rates while the grantor absorbs income taxes.

Technical Scope & Calculation Limitations

Assumes constant annual asset appreciation and notes held to maturity without early renegotiation or valuation discount challenges.

Frequently Asked Questions

An IDGT installment sale is an estate planning strategy where a grantor sells appreciating assets to an irrevocable grantor trust in exchange for an AFR promissory note, removing future growth from the grantor's taxable estate.

Windows Desktop & Widget Options