The terms 401(k) and individual retirement account (IRA) are bandied about quite a bit when discussing retirement planning, b...Read more
What Is the Generation-Skipping Transfer Tax?
- May 17th, 2013
The estate tax gets all the press, but if you are leaving property to a grandchild, there is an additional tax you should know about. The generation-skipping transfer (GST) tax is a tax on property that is passed from a grandparent to a grandchild (or great-grandchild) in a will or trust. The tax is also assessed on property passed to unrelated individuals more than 37.5 years younger. Like the estate tax, it is currently repealed, but is scheduled to return in 2011.
The GST tax was designed to close a loophole in the estate tax. Normally, grandparents would leave their estates to their children, incurring estate taxes. Then the children would pass on the estates to the grandchildren, incurring estate taxes again. Wealthy individuals realized they could leave their estates to their grandchildren directly and avoid one set of estate taxes. Congress established the GST tax to prevent this by taxing transfers to related individuals more than one generation away and to unrelated individuals more than 37.5 years younger.
Local Elder Law Attorneys in Ashburn, VA
Felinton Elder Law & Estate Planning Centers
Mindy Felinton concentrates in the areas of Medicaid planning, Veterans' Benefits, asset protection, nursing home planning, elder law, wills, estate planning, trusts, living wills, powers of attorney, probate administration and trust administration and began her legal career 30 years ago as an Assistant State Attorney...
The Estate Planning & Elder Law Firm PC
Bill founded The Estate Planning & Elder Law Firm, P.C. in 1994. Bill limits his practice to the areas of estate planning and administration, incapacity planning, Medicaid, asset protection planning, and elder law. He is one of (15) fifteen attorneys practicing in Virginia, Maryland and the District of Columbia, ce...
Farr Law Firm
In practice since 1987, Fairfax Attorney Evan Farr is widely recognized as one of the leading Elder Law, Estate Planning, and Specials Needs attorneys in Virginia and one of foremost experts in the Country in the field of Medicaid Asset Protection and related Trusts. Evan Farr has been quoted or cited as an expert by n...
A GST tax is imposed even when property is left in trust for a grandchild. For example, suppose a grandparent sets up a trust that leaves income to her children for life and then the remainder to her grandchildren. The part of the trust left to the grandchildren will be subject to a GST tax.
The GST tax has tracked the estate tax rate and exemption amounts. In 2009, the federal government exempted $3.5 million from the tax and the tax rate was 45 percent. The GST tax expired in 2010 along with the estate tax, but it is scheduled to return in 2011. Unless Congress acts in the meantime, the 2011 GST tax exemption amount will be $1 million and the tax rate will be 55 percent.
Last Modified: 05/17/2013