What is VA Pension Benefit Asset Protection Trust?
I will briefly explain one of the Asset Protection Trusts that I use for VA Pension Benefit Planning. It is called Intentionally Defective Grantor Trust (IDGT). IDGT is a trust that treats the assets in the trust differently for income tax purposes than for estate tax and gift tax purposes. The veteran will be the grantor but not a beneficiary. This trust will take advantage of the Internal Revenue Code Sections 671-677, and takes advantage of the differential tax treatment for income tax purposes. For most veterans, the major asset in this trust is the residence. If the veteran owns the residence as an individual and sells it, then the proceeds will be part of the veteran’s Net Worth and will disqualify the veteran for the VA Pension Benefit. However, if the residence is in the trust and sold by the trustee of the trust, the proceeds from the sale of the house is not imputed to the veteran by VA. By transferring the residence to the IDGT, the veteran has already transferred the asset
