2022 Trust Forum Presentations

WHAT IS A GENERATION-SKIPPING EVENT?

• Taxable Termination Taxable Distributions

Direct Skip

P

P

(G)P

Estate Tax

C

C

GST

GST

And GST

GC

GC

GC

Note: There isn’t GST until money “touches” a “skip person.” A skip person is someone two or more generations below the transferor. The transferor is the last person in whose estate the assets would have been subject to tax (in the testamentary context) or the person who would pay gift (in the inter vivos context). In the examples above, P and (G)P are the transferor. Be Careful: - A general power of appointment can change the transferor. - If H dies and funds a QTIP Trust H = transferor, but when W dies she is the transferor. - Even if someone isn’t related to the transferor they can be a skip person (go by number of years - someone more than 37-1/2 years younger than the transferor is a skip person).

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HOW IS GST DETERMINED? • GST = Taxable Amount x (Maximum Federal Rate x IR).

• Taxable Amount – asset that “touches” the grandchild (“skip person”) in one of the three types of generation-skipping events outlined on the earlier slide. • Maximum Federal Rate = 40%. • IR – that’s the key…

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