What is ‘Generation-Skipping Transfer Tax – GSTT’
A tax incurred when there is a transfer of property by gift or inheritance to a beneficiary who is more than 37.5 years younger than the donor. Generation-skipping transfer taxes serve the purpose of ensuring that taxes are paid when assets are placed in a trust, and the person receives amounts in excess of the generation-skipping estate tax credit.
Explaining ‘Generation-Skipping Transfer Tax – GSTT’
GSTT commonly occurs with a transfer to grandchildren. However, most people will hardly incur this tax as the GSTT exemption has for the past few years ranged between $3.5 million to $5 million. Additionally, transferors can create dynasty trusts which are completely released from paying the GSTT.
Further Reading
- The Generation-Skipping Transfer Tax: A Quick Guide – papers.ssrn.com [PDF]
- Simplifying the use of the generation-skipping transfer tax exemption – search.proquest.com [PDF]
- Generation Skipping—Planning Principles – lib.dr.iastate.edu [PDF]
- Avoiding GSTT Asteroid – heinonline.org [PDF]
- Should I Create a Trust for My Child-Choosing between the Generation-Skipping Transfer Tax and the Estate or Gift Tax – heinonline.org [PDF]
- Transfer Tax Planning and Management – link.springer.com [PDF]
- Fixing the Federal Wealth Transfer Tax System – papers.ssrn.com [PDF]
