Q&A

Is a GST trust revocable or irrevocable?

Is a GST trust revocable or irrevocable?

The new trust must have many similarities with the prior trust but allows for changes of certain provisions. The GST trust must be drafted as an irrevocable trust.

What kind of tax is generation skipping Trust?

A generation-skipping trust is a legally binding agreement in which assets are passed down to the grantor’s grandchildren, not the grantor’s children. Usually non-deductible, a transfer tax is any kind of tax that is levied on the transfer of ownership or title to property from one entity to another.

Who is eligible for a generation skipping transfer?

Any individual is eligible to receive a generation-skipping transfer as long as they are at least 37½ years younger than the transferor. The generation-skipping transfer tax is imposed only if the transfer avoids incurring a gift or estate tax at each generation level.

When was the generation skipping transfer tax introduced?

Before the generation-skipping transfer tax was introduced in 1976, wealthy individuals were legally able to gift money and bequeath property to their grandchildren, without paying federal estate taxes . But the new legislation effectively closed the loophole where inheritances could skip a generation to avoid double estate taxation.

When do non skip persons receive assets from a trust?

The latter occurs when an interest in a trust terminates, unless (a) only non–skip persons receive the trust assets, and (b) no skip persons have a right to receive the assets after the termination. The inclusion ratio is the key to the GSTT on transfers in trust.

When do you need a generation skipping Trust?

A generation-skipping trust is used to transfer money or other assets to someone who is at least 37.5 years younger than you. The primary purpose of a generation-skipping trust is to minimize estate taxes and generation-skipping transfer taxes.

Can a GST be removed from a generation skipping Trust?

It may sound like GSTs cannot provide any financial advantages to a grantor’s children, but on the contrary, the grantor can give his or her children access to any income the trust’s assets generate without removing the assets from the GST.

Who is the skip person in a trust?

Traditionally, people use a generation-skipping trust to bypass their children and pass assets directly to their grandchildren or even great-grandchildren. A recipient of the trust assets is known as a skip person and while grandchildren are common skip persons, the trust beneficiaries don’t have to be related to the grantor (trust creator).

Who is the skip person in generation skipping transfer?

A generation-skipping transfer (GST) refers to the transfer of money or property, as a gift or inheritance, to a person who is two or more generations below that of the grantor. The giving party is referred to as the “transferor” and the recipient is known as the “skip person”.