Generation Skipping Transfer Tax

Question 1

Who are skip persons?

Answer 1

Grandchildren

Unrelated persons, more than 37 1/2 years younger

Individual’s parent who is a linear descendent of the transferor is deceased, succeeding generations, move up one generation

Question 2

Who is liable for taxes on a direct skip?

Answer 2

Transferor

Question 3

When a trust has beneficiaries in two or more generations and the trustee makes a distribution to a skip person what type of distribution is it?

Answer 3

Taxable distribution and because it is a future interest, no $18,000 annual gift exclusion applies

Question 4

Is the $13,610,000 of GSTT exemption per Donee or to all Donees?

Answer 4

all Donees

Question 5

Are the federal estate tax and the GSTT two separate taxes?

Answer 5

Yes

You first determine the gift tax payable

Then You take the total estate minus the $13,610,000 plus amount of gift taxes paid then you multiply the amount left by the 40% GST tax. Note if you’ve used an $18,000 annual exclusion, you add that back as well to subtract from the gross estate.

Question 6

Who is liable for payment of the GSTT?

Answer 6

• If the transfer is a direct skip, the transferor pays the GSTT (one giving)
• If the transfer is a taxable termination, the GSTT is paid by the trustee
• If the transfer is a taxable distribution, the GSTT is paid by the transferee (one recieving)

Question 7

Is the Generation skipping tax (GST) subject to the three year gross up rule and do you get credited against estate taxes for the GST paid?

Answer 7

No and No

GST taxes paid are not subject to the three year Lookback rule like gift taxes paid and unlike tax paid an estate receives no credit for GSTT paid