New Update: Healthcare Costs Increasing by Over 60% in Some States. Will you be impacted?

How Super Micro Computer Employees Can Use Intentionally Defective Grantor Trusts (IDGTs) in Estate Planning

Healthcare Provider Update: Offers medical, dental, and vision plans from day one, plus FSAs, HSAs, and wellness perks like free meals and gym discounts 9. With ACA premiums expected to increase, Supermicros comprehensive benefits help employees avoid marketplace cost spikes. Click here to learn more

“Super Micro Computer employees reviewing IDGTs can benefit from understanding how these trusts may support long-term legacy planning, although qualified legal and tax professionals should review these strategies to determine whether they fit into their overall goals.” ~ Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

“Super Micro Computer employees considering an IDGT should recognize how this strategy may support long-term wealth transfer goals, although these structures should be reviewed with qualified legal and tax professionals to determine whether they align with each household’s broader plan.” ~ Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

How intentionally defective grantor trusts (IDGTs) work.
The advantages and potential limitations of using an IDGT.
Key considerations for Super Micro Computer employees evaluating this type of planning strategy.

An irrevocable trust arrangement known as an intentionally defective grantor trust (IDGT) allows the grantor to move assets out of their taxable estate while still being treated as the owner of those assets for income tax purposes. Many people, including Super Micro Computer employees with high-growth or income-producing holdings, may benefit from using this strategy to support long-term wealth preservation.

How an Intentionally Defective Grantor Trust Works

For tax purposes, different kinds of trusts receive different treatment, and understanding the distinctions can help Super Micro Computer professionals review planning strategies more effectively.

Revocable Trusts

In a revocable trust, the grantor is taxed on trust income and is regarded as the owner for income tax purposes. A separate trust income tax return is usually unnecessary. These assets generally remain inside the grantor’s taxable estate because the grantor maintains full control.

Irrevocable Trusts

An irrevocable trust is treated as its own tax entity, filing its own return and taking its own deductions. When properly drafted so the grantor does not retain certain powers or interests, assets transferred to an irrevocable trust are generally removed from the taxable estate, a detail that can matter for Super Micro Computer professionals with substantial savings or investment holdings.

How IDGTs Combine These Features

An IDGT is structured as an irrevocable trust for estate and gift tax purposes, removing assets from the taxable estate, but is treated as a grantor trust for income tax purposes. As long as the grantor pays income taxes on trust earnings, the trust’s assets can grow outside the estate, which may appeal to Super Micro Computer professionals with long-term legacy goals.

Why It’s Called “Intentionally Defective”

The trust is drafted so that, under IRS grantor-trust rules, the grantor remains the owner for income tax purposes due to certain retained powers. At the same time, the trust is irrevocable for estate tax purposes, allowing the assets to remain outside the taxable estate—a structure that may assist with multigenerational planning.

Advantages of an Intentionally Defective Grantor Trust

Because an IDGT is a grantor trust for income tax purposes, the grantor pays income tax on trust earnings. This leads to two important benefits that may interest Super Micro Computer employees with high-value assets:

- Trust assets can grow for beneficiaries without being reduced by income tax payments.
- Income tax paid by the grantor reduces the taxable estate without being classified as a gift.

- This dynamic—where grantors use personal funds to pay taxes that would otherwise reduce trust assets—is often referred to as a “tax burn.”

How Assets Are Transferred to an IDGT

Super Micro Computer employees reviewing wealth transfer strategies may encounter two common approaches:

1. Gift or Partial Gift/Sale

A grantor can move assets to an IDGT as a gift. If the gift stays within the lifetime gift and estate tax exemption, it typically does not create out-of-pocket gift tax. Some planning approaches combine a partial gift with a sale to balance estate goals.

2. Sale to the IDGT

Many grantors sell assets to an IDGT in exchange for a promissory note with an interest rate at or above the IRS Applicable Federal Rate (AFR).

- The sale is typically not treated as a taxable gift if conducted at fair market value.
- Appreciation above the AFR occurs outside the grantor’s estate for beneficiaries.
- When AFR rules and loan requirements are followed, the note is treated as valid consideration and carries an interest obligation.

Potential Drawbacks of an IDGT

Once established, an IDGT is difficult to modify, similar to other irrevocable trusts. Outcomes also depend on the trust assets growing at a rate higher than the AFR. If that does not occur, the intended estate planning benefits may fall short—an important consideration for Super Micro Computer employees reviewing various asset types.

Who Might Consider an IDGT?

An IDGT can be appealing for families facing potential estate tax exposure, especially when transferring assets with strong growth potential. This approach works best when the grantor has sufficient liquidity to continue paying the trust’s income taxes personally, a factor some Super Micro Computer employees review when assessing retirement and estate liquidity. Because the structure requires precise legal drafting, it should be established with qualified legal counsel.

Need Support with IDGTs or Retirement Planning?

The Retirement Group can assist you in reviewing whether an IDGT fits into your broader retirement and estate plan as a Super Micro Computer employee. For guidance tailored to your long-term goals, call us at (800) 900-5867 .

Featured Video

Articles you may find interesting:

Sources:

1. BMO Wealth Management. Herman, Brad. Intentionally Defective Grantor Trust. BMO Financial Group, Oct. 2021,
https://uswealth.bmo.com/media/filer_public/8b/3f/8b3f85c6-21b0-407e-bfbf-0f9b181c1673/bwm_idgtarticle_1103.pdf .

2. Fidelity Wealth Management. “What Is an Intentionally Defective Grantor Trust (IDGT)?” Fidelity Viewpoints , 4 Dec. 2025,
https://www.fidelity.com/viewpoints/wealth-management/insights/intentionally-defective-grantor-trusts .

3. Hirtle, Callaghan & Co. Estate Planning With Intentionally Defective Grantor Trusts.
Hirtle, Callaghan & Co., 2020,
https://www.hirtlecallaghan.com/wp-content/uploads/2020/08/Intentionally-Defective-Grantor-Trusts.pdf .

4. Nevada Trust Company. Ford-Grella, Jaclyn. “How Intentionally Defective Grantor Trusts Can Safeguard Assets for Future Generations.” Nevada Trust Company , 10 Dec. 2024,
https://www.nevadatrust.com/how-intentionally-defective-grantor-trusts-can-safeguard-assets-for-future-generations/ .

What type of retirement savings plan does Super Micro Computer offer to its employees?

Super Micro Computer offers a 401(k) retirement savings plan to its employees.

How can employees at Super Micro Computer enroll in the 401(k) plan?

Employees at Super Micro Computer can enroll in the 401(k) plan by completing the enrollment form available through the HR department or the employee portal.

Does Super Micro Computer match employee contributions to the 401(k) plan?

Yes, Super Micro Computer provides a matching contribution to the 401(k) plan, subject to specific terms outlined in the plan documents.

What is the maximum contribution limit for the 401(k) plan at Super Micro Computer?

The maximum contribution limit for the 401(k) plan at Super Micro Computer is determined by the IRS limits, which can change annually.

When can employees at Super Micro Computer start contributing to their 401(k) plan?

Employees at Super Micro Computer can start contributing to their 401(k) plan after completing their eligibility period, which is typically outlined in the plan documentation.

Are there any fees associated with the 401(k) plan at Super Micro Computer?

Yes, there may be administrative fees associated with the 401(k) plan at Super Micro Computer, which are disclosed in the plan documents.

Can employees take loans against their 401(k) savings at Super Micro Computer?

Yes, Super Micro Computer allows employees to take loans against their 401(k) savings, subject to specific terms and conditions outlined in the plan.

What investment options are available in the Super Micro Computer 401(k) plan?

The Super Micro Computer 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.

How often can employees at Super Micro Computer change their 401(k) contribution amounts?

Employees at Super Micro Computer can change their 401(k) contribution amounts during designated enrollment periods or as specified in the plan guidelines.

Is there a vesting schedule for employer contributions in the Super Micro Computer 401(k) plan?

Yes, there is a vesting schedule for employer contributions in the Super Micro Computer 401(k) plan, which determines how much of the employer match employees are entitled to based on their years of service.