Unlike a typical revocable (grantor) trust, an IDGT effectively removes the assets transferred to the trust from the grantor's estate.
As a result, the grantor continues to pay income tax on the income generated by the trust during the grantor's lifetime, but there is generally no stepped up basis upon the death of the grantor (the valuation is "fixed" or "set" at the time the assets are transferred into the IDGT).
