Fundamentals of Generation-Skipping Transfer Taxation

A significant challenge for tax advisers and compliance professionals is navigating the GST tax, which has the reputation of being one of the most complicated tax rules. However, the basic mechanics of the GST tax regime lie in identifying situations in which inter-generational transfers are designed to circumvent estate or gift tax liability.

Tax advisers serving high net worth individuals, as well as fiduciary compliance professionals, need to understand the fundamentals of the GST tax to avoid unnecessary tax cost.

A GST occurs when a person gifts or bequeaths property to a person who is two or more generations younger than the person transferring assets. The recipient of a GST is a "skip person." The GST tax is designed to prevent taxpayers from avoiding estate or gift taxes by imposing a flat tax on any gifts to skip persons more than the GST estate tax exemption amount.

There are two types of GSTs—direct skips and indirect skips. Tax advisers must be able to identify both kinds of transfers subject to the tax to calculate exemption amounts and accurately report GST on Form 709.

Listen as our experienced panel provides practical guidance on GST rules, allocating GST exemptions, and on the elections available to tax advisers and compliance professionals to minimize the impact of GST tax.

I. Overview of how GST tax fits into the wealth transfer tax regime

II. Defining the rules governing when a GST takes place

A. Identifying skip persons

B. Direct skip transactions

C. Indirect skip transactions

III. GST exemption and allocation rules

IV. Illustration of a basic skip transaction and how to report

The panel will discuss these and other important issues:

• Identifying "skip persons" and gifts that qualify as GSTs
• Direct skips vs. indirect skips
• Guide to Form 709 for gifts that must be reported but do not incur GST tax
• Calculating GST tax on taxable gifts