What is the generation-skipping tax and how is it calculated?
The generation-skipping transfer tax is imposed on a transfer of property to a person who is at least two generations below the transferor’s generation. The purpose of the law is to tax transfers that split the benefits of property between generations. The tax is a flat rate equal to the maximum unified tax rate at the time of the transfer subject to an exemption of $1.5 million available to each transferor. The tax has no effect on trusts if the property never passes to a person who is two or more generations removed from the transferor. Thus, if transferor creates a trust for the transferor’s child, and upon the death of that child the property passes to the transferor’s grandchild, there is no generation-skipping transfer tax. There are three generation-skipping transfers: taxable terminations, taxable distributions, and direct skips. Transferees are categorized as either skip or non-skip persons.
The generation-skipping transfer tax is imposed on a transfer of property to a person who is at least two generations below the transferor’s generation. The purpose of the law is to tax transfers that split the benefits of property between generations. The tax is a flat rate equal to the maximum unified tax rate at the time of the transfer subject to an exemption of $1.5 million available to each transferor. The tax has no effect on trusts if the property never passes to a person who is two or more generations removed from the transferor. Thus, if transferor creates a trust for the transferor’s child, and upon the death of that child the property passes to the transferor’s grandchild, there is no generation-skipping transfer tax.
The generation-skipping transfer tax is imposed on a transfer of property to a person who is at least two generations below the transferor’s generation. The purpose of the law is to tax transfers that split the benefits of property between generations. The tax is a flat rate equal to the maximum unified tax rate at the time of the transfer subject to an exemption of $1.5 million available to each transferor. The tax has no effect on trusts if the property never passes to a person who is two or more generations removed from the transferor. Thus, if transferor creates a trust for the transferor’s child, and upon the death of that child the property passes to the transferor’s grandchild, there is no generation-skipping transfer tax. There are three generation-skipping transfers: taxable terminations, taxable distributions, and direct skips. Transferees are categorized as either skip or non-skip persons.
