Friday, May 25, 2018
Chapter 13 of the Internal Revenue Code specifically deals with the generation-skipping transfer (GST) tax, the tax which deals with transfers to individuals more than one generation below the donor. The belief of Congress is that property should be transferred once at every generation, so assets left to grandchildren should not avoid a taxation.
This tax generally applies to transfers made after October 22, 1986, but Congress grandfathered in transfers from irrevocable trusts that were in existence on September 25, 1985, but only if the transfer wasn’t made out of trust property that was added to the trust after that date or to income attributable to such later-contributed property. Altering these types of trusts can be tricky so that they do not lose their GST exemption. Modifications may generate irreversible damage to the trust and its beneficiaries. Any alterations, even simple ones, must be examined with a careful eye to ensure there are no unintended gift tax consequences and no accidental estate tax inclusion and that any exclusion from the GST taxing regime is retained.
See Andrew M. Nernery and Brianna L. Guerrea, GST Tax Exemptions in Jeopardy, Wealth Management, May 18, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.