Wealth Transfer Strategy
Model an Installment Sale to a Trust
An installment sale to an Intentionally Defective Grantor Trust (IDGT) lets you compare a sale of an appraised interest for an AFR note with retaining the same capital. The model separates gross pro-rata NAV, appraised fair market value, note liquidity, seed capitalization, grantor receipts, and value remaining outside the taxable estate.
Installment Sale Simulator
Model your installment sale scenario with 5,000 reproducible market paths. See the range of wealth transfer outcomes after the balloon repayment.
Configure Your Sale
Adjust the valuation, note, liquidity, return, and estate-tax assumptions.
Undiscounted entity NAV; this is not the transferred interest's appraised FMV.
Requires a qualified appraisal. Marketable assets are fixed at 0%.
IRS Sep 2026: 4.5% · Rev. Rul. 2026-17 · Manual or latest-on-file rate; confirm transaction-month AFR
Planning convention only; no statutory 10% safe harbor is assumed.
Cash distributions service interest; shortfalls capitalize into the note.
Limits value available to repay principal; residual debt remains a trust liability.
Includes the retained appraised interest and seed cash; net other deductions before state estate tax.
The seed gift is added to this amount; scenarios above the $15M exclusion are rejected because gift tax is not modeled.
Discussing the result
Review the illustration with Altar Rock.
Altar Rock can coordinate the investment analysis with your qualified appraiser, estate attorney, and tax adviser while the trust and note terms are evaluated.
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Valuation & Discount Analysis
Coordinate with a qualified appraiser on the value of a business, FLP, or LLC interest and any supportable lack-of-control or marketability discount.
Trust & Note Structuring
Coordinate the IDGT structure, promissory-note terms, seed gift and documentation with estate and tax counsel, including a review of IRS requirements.
Investment Management
Manage the trust's investments with the goal of growth above the AFR hurdle while planning for the note payments.
GRAT + Sale Integration
Evaluate how installment sales, rolling GRATs and outright gifts could work together in your wealth-transfer plan.
Installment sale mechanics
How an installment sale to an IDGT works
An illustration for a marketable asset at full value or a closely held interest whose fair market value is supported by a qualified appraisal.
At the transfer
The appraisal supports the sale price
A qualified appraisal may value a transferred minority interest below its pro-rata share of entity NAV. The note equals that separately appraised fair market value.
The model does not create wealth from the discount or apply a discount to marketable assets.
During the term
Interest returns to you during the term
The trust pays you interest-only at the AFR (Applicable Federal Rate) for the transaction month, maturity category, and annual compounding convention.
For Sep 2026, the published mid term annual AFR is 4.5%. The principal is repaid as a balloon at maturity.
After the obligations
Residual equity may stay in the trust
Trust equity remaining after interest and balloon obligations can stay outside the grantor's estate if the structure and valuation are respected.
This illustration does not model grantor income-tax burn, basis, legal costs, note security, or trust income tax.
Strategy comparison
Comparing an installment sale with a GRAT
Installment sales use a note rather than a retained annuity. The result depends on appraisal support, note terms, trust capitalization, cash distributions, liquidity, grantor-trust status, and actual administration.
Appraised interest value
A supported lack-of-control or marketability discount can distinguish interest FMV from pro-rata NAV; it is not automatic wealth.
The rate hurdle
AFR is typically lower than the §7520 rate, meaning the trust needs to clear a lower bar to transfer wealth.
What you retain
The collectible unpaid note and retained cash remain grantor assets. Mortality and death-time income-tax consequences require separate advice and are not simulated here.
The balloon at maturity
Interest-only payments preserve trust capital during the note term, with principal repaid at maturity.
Model scope
Assumptions and limits
- Published reference rate
- 4.5%
Sep 2026 annual mid term AFR for the selected term.
- Default appraisal input
- 30%
Illustrative input for a qualifying nonmarketable interest. The calculator supplies no appraisal conclusion.
- Income-tax treatment
- Grantor-trust status
The illustration assumes no income-tax recognition on the sale while grantor-trust status applies. Basis consequences are not modeled.
Important disclosures
Model Scope and Assumptions
Valuation and Liquidity
- Gross pro-rata NAV is separate from appraised transferred-interest FMV
- The appraisal discount persists through the model; no discount is allowed for marketable assets
- Cash distributions service interest; unpaid interest capitalizes into the note
- Balloon repayment is limited by the selected maturity liquidity
Tax and Legal Scope
- 2026 federal and selected state estate-tax law is held fixed
- Estate is entered before state estate tax and net of other deductions
- No portability, recent-gift addbacks, inheritance tax, marital/special deductions, or out-of-state property
- Seed capital consumes federal exclusion; gift-tax scenarios above $15M are rejected
Return and Comparison
- Arithmetic expected total return drives a lognormal annual model
- One fixed seed makes repeated runs with unchanged inputs reproducible
- Comparison uses the same appraised interest, seed cash, and market path
- Success means trust equity exceeds seed capital by more than $50,000
Not Modeled
- Mortality, note security/default remedies, legal/trustee/appraisal costs, or refinancing
- Grantor income-tax burn, capital-gain basis, step-up, or loss of grantor-trust status
- Carrier, court, or IRS acceptance of a valuation or transaction structure
- The 10% seed convention is not a statutory safe harbor
This calculator is for illustrative purposes only and does not constitute investment, tax, or legal advice. Monte Carlo simulations use reproducible hypothetical market scenarios and do not predict future results. Valuation discounts must be supported by qualified appraisals. The IRS has not expressly sanctioned the installment sale to IDGT technique; consult a qualified attorney, appraiser, and tax advisor before implementing. AFR rates are published monthly by the IRS. Altar Rock LLC is an SEC-registered investment adviser.