The Control Freak’s Trust: The BDIT Strategy
The Control Freak’s Trust: The BDIT Strategy
Traditional trusts treat heirs like children. The BDIT treats them like CEOs. How to lock your assets in a fortress against divorce and lawsuits, while retaining the power to invest, spend, and manage them yourself.
Executive Summary
- The “Trust Fund Baby” Problem: Most parents set up trusts where a bank acts as Trustee and the child is a passive beneficiary. The child must ask the bank for money. This destroys the child’s entrepreneurial spirit and leaves them powerless.
- The Solution (BDIT): The **Beneficiary Defective Inheritor’s Trust (BDIT)** flips the script. Instead of the parent creating the trust for the child, the **child (Beneficiary) effectively creates the trust for themselves** (using a legal loophole involving a “seed gift” from a third party, like a parent).
- The “Have Your Cake” Outcome:
1. Control: You (the Heir) act as the **Investment Trustee**. You decide to buy Tesla stock, real estate, or crypto. No bank permission needed.
2. Protection: Because you “sold” assets to the trust rather than gifting them, the assets are technically not yours. If you get divorced or sued, the creditors cannot touch the trust assets.
The “Crummey” Mechanic
The Legal Magic: How can you be the beneficiary of a trust you control, without the IRS including it in your estate tax?
👉 The Seed: A parent gifts $5,000 to the trust. You (the child) are given the right to withdraw this $5,000 for 30 days (Crummey Power). You don’t withdraw it. By letting the power lapse, you become the “Grantor” for income tax purposes (paying the tax), but the trust assets remain outside your estate for death tax purposes.
Mechanic: The Sale to Yourself
Simulation: Entrepreneur Heir ($10M Startup Idea)
| Feature | IDGT (Parent Created) | BDIT (Heir Created) |
|---|---|---|
| Primary Beneficiary | Usually Children/Grandkids | YOU (The Heir) |
| Trustee Control | Independent / Bank | YOU (Investment Trustee) |
| Asset Protection | Strong | Strong (Self-Settled*) |
*Note: BDITs must be established in DAPT-friendly states (NV, SD, DE) to ensure asset protection works for a “Self-Settled” trust.
“The BDIT allows you to live in the house, drive the car, and spend the money, but legally own nothing. It is the ultimate expression of the Rockefeller maxim: ‘Own nothing, but control everything.'”