Generation Skipping Tax
About Generation Skipping Tax
The generation skipping transfer tax GST was enacted in 1986 to prevent families from avoiding estate tax by transferring wealth to grandchildren or great grandchildren, skipping a generation. Without the GST, wealthy families could place assets in trusts that benefited grandchildren, avoiding one or more rounds of estate tax. The GST applies the highest estate tax rate to transfers that skip generations. Each person has a GST exemption, equal to the estate tax exemption of 13.61 million in 2024. Dynasty trusts, which can last for hundreds of years in states like Delaware and South Dakota, are designed to minimize GST impact. The GST is one of the most complex provisions in the tax code. Practitioners complain that GST compliance is extremely burdensome for wealthy families and their advisors.
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