Generation-Skipping Transfer Tax (GSTT)

The Generation-Skipping Transfer Tax (GSTT) is a federal tax imposed on transfers of property that skip a generation. The tax is designed to prevent wealthy individuals from avoiding estate taxes by transferring their assets to their grandchildren or other descendants.

The GSTT is levied at a rate of 40% on the value of any property that is transferred to a skip person. A skip person is any person who is two or more generations younger than the transferor. For example, if a grandparent transfers property to a grandchild, the transfer will be subject to the GSTT.

There are a number of exemptions from the GSTT. These include transfers to a spouse, transfers to a charity, and transfers that are made in trust. However, it is important to note that the GSTT is a complex tax, and it is important to consult with a tax advisor to ensure that you are complying with the law.

The GSTT is a significant tax, and it can have a major impact on the estate planning of wealthy individuals. If you are considering making a large transfer of property, it is important to understand the GSTT and how it may affect you.

Here are some additional details about the GSTT:

• The GSTT is imposed on the transferor's estate, not on the recipient of the property.
• The GSTT is calculated on the value of the property that is transferred, minus any applicable exemptions.
• The GSTT is due at the time of the transfer.
• The GSTT is enforced by the Internal Revenue Service (IRS).

If you have any questions about the GSTT, please consult with a tax advisor.