High-net-worth prospects consistently have to address two critical issues regardless of how much wealth they have amassed: (1) They must determine equity among heirs; and (2) how much is enough for each child. They may feel equity among heirs is not an issue and ignore it completely. In the world of "uber wealth," high-net-worth prospects may struggle with how much wealth they want their children to own directly or control indirectly. 
This struggle can cause procrastination and indecision. For families that have taken the time to educate their children on managing large sums of wealth, the issue often ceases to exist. But, for others, it is a growing concern that too often is only addressed from the grave.
Enter the IDIT
One of the most important tools in this world is the grantor defective trust. There are multiple permutations of this tool which can achieve different objectives. But let's focus on the intentionally defective irrevocable trust.
The benefit of an IDIT is simple: All assets inside the trust are outside the estate tax system for the beneficiaries and the grantor. By using an IDIT, clients can do something for their children (as the grantor) they cannot do for themselves. They can help remove family heirlooms (their most precious assets) from the tax system for multiple generations. An IDIT also enables them to protect these assets from creditors and divorce.
These issues resonate with most families. They don't want to see their hard-earned assets end up in the hands of an outsider in the event, for example, of a divorce. They also have increasing fears about lawsuits and creditors. Asset protection is no longer a cottage industry. It is a real goal for many families.
One of the most interesting aspects of an IDIT is its "defective" component. If a trust is deemed defective, the income earned by the trust will be taxed to the grantor, not the trust or the beneficiaries. Of still greater benefit, the grantor can sell assets to the trust without having to pay taxes on the sale. The sale replaces the asset with a note payable to the grantor, the note to be included in the estate at death.
By selling the family heirlooms while they are still alive, high net worth clients can direct the use of estate assets and benefit from their economic value. They can retain an element of control without sacrificing income. And they can remove from the estate future appreciation on the assets.
Using life insurance
Once the trust planning has been accomplished, there is an excellent reason to consider life insurance. Unfortunately, all too often wealthy families eschew the benefits of life insurance because they feel they have enough money.
Money is never worth more than the wage it can earn. What we are really talking about is the cost of liquidity, which is expensive. There is an opportunity cost associated with liquidity. The investor must forego growth and income in order to obtain liquidity. This is because the money is not being used at its highest and best use.
