Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, November 6, 2018

Beating GST Tax with HEETs

GstFor the client that wishes to leave assets to their grandchildren, they are often hindered by the generation skipping transfer tax, or GST tax. This tax is the IRS's method of taxing this special type of transfers, but advisors and attorneys have their own method of assisting their clients with this predicament.

A Health and Education Exclusion Trust (HEET), as the name implies, can only pay for the medical and/or educational needs of the clients’ grandchildren and their descendants. But there is also another catch: one of the designated beneficiaries is required to be a charitable organization, and it is recommended to transfer 6-10% of the trust income to the charity annually. This stipulation allows the trust to be different than other generation-skipping trusts and  pass IRS scrutiny.

Unlike a 529 plan, a HEET can be used to fund education at any level, from kindergarten to graduate school. Though the trust cannot directly benefit the grandchild, it can do so by taking away this particular financial burden from the grandchild's parents. The trust can also pay insurance premiums, so another load off of a parent's shoulders.

See Beating GST Tax with HEETs, Wealth Counsel, October 26, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.


Current Affairs, Estate Planning - Generally, Generation-Skipping Transfer Tax, Trusts | Permalink


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