A Generation Skipping Trust (also known as GST) is a trust that is passed down to your grandchildren and not the children. A GST is not just for grandchildren it can extend to other family members or individuals who are not related to you of a younger generation. This type of a trust is only applicable to individuals who are at least 37 ½ years younger than the grantor.
The current federal Generation Skipping Transfer Tax (GST Tax) came into existence with the Tax Reform Act of 1986 (the original 1976 version was repealed retroactively). The basic concept of the GST is that the federal estate tax is designed to impose a tax on the right to transfer assets at death, and the federal gift tax is designed to make sure the estate tax is not avoided through lifetime giving. Similarly, the federal GST Tax is designed to make sure that taxpayers do not avoid the estate and gift tax through the use of long-term trusts for a lifetime.
To learn more about Generation Skipping Trusts call our office at (650) 463-1550 to schedule your complimentary consultation with one of our highly qualified estate planning attorneys.
