The Beneficiary-Taxed Irrevocable Trust (BETIR Trust, pronounced "better trust") is a variation of the so-called "Intentionally Defective Grantor Trust" (IDGT), which means that it is an irrevocable trust that is treated as a grantor trust for tax purposes.
Like an IDGT, the BETIR Trust allows for tax-neutral funding and the client/beneficiary may receive tax-neutral repayments over time. Because the balance of the assets in the trust pass outside the client's estate at death, this form of trust is ideal for funding with cash-value life insurance.
The advantage of the BETIR Trust is that it is not considered a self-settled trust for collection law purposes, which means that it offers a very significant degree of asset protection that is not offered by a standard IDGT.
The BETIR Trust can be formed in any state, and is not dependent on any laws that are unique to particular states. Thus, the BETIR Trust is not restricted to so-called "Domestic Asset Protection Trust" (DAPT) states, such as Alaska or Delaware.
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