Why Use a Generation Skipping Trust?
If one of your estate planning goals is to provide for the financial security of grandchildren, great-grandchildren or even generations beyond that — generation skipping trusts may be your most effective tool to achieve that. Above and beyond estate taxes, transfers to grandchildren or more remote descendants may be subject to a “generation-skipping transfer tax”, or GST tax. This tax effectively allows the IRS to tax every generation. Fortunately, there is an exemption from the GST tax which is equal to the applicable exclusion amount (currently $2MM). There may be many reasons to do a direct skip of up to $2MM to a grandchild. You also can do an indirect skip. Personal reasons for using generation skipping trusts are also common. For instance, you could be estranged from your own son or daughter but don’t want that to get in the way of doing what you feel is right for your grandchildren. Perhaps you have plenty of money and simply want to spread it around the family. Maybe your child
