What is a Generation-Skipping Trust?
For Federal Estate Tax purposes, the general rule is that family wealth is taxed at the end of each generation. This means that the assets parents leave to their children will generally be taxed again as part of the children’s estate when they pass away. A way to avoid this retaxation is by using a Generation-Skipping Trust. Beneficiaries are often puzzled when they learn that their inheritance left in a Generation-Skipping Trust. The name of the trust seems to imply that the decedent meant to “skip” them. Actually the decedent left the assets in this fashion to skip a generation of estate taxes when the beneficiary dies and to provide other protections for the beneficiary during his or her lifetime. These are some of the ways a Generation-Skipping Trust benefits the beneficiary: 1. The assets in the trust are protected from certain liabilities such as car accidents and certain other types of lawsuits. 2. The assets in the trusts remain separate property and are protected from division
