a trust that skips one or more generations (grandparent's trust for grandchildren that bypasses the parents)
A tax-saving trust, where the principal is left in trust for oneâ€(tm)s grandchildren (or any beneficiary two or more generations removed from the grantor), with the current beneficiaries (often the children) receiving only the trust income.
A trust having a beneficiary who is two or more generations younger than the grantor (called a "skip" person). A generation-skipping tax is imposed on gifts of more than $1.1 million in 2002 ($1.11 million in 2003; $1.5 million in 2004). This tax is in addition to any gift or estate tax on the same amount. (See Dynasty trust.)
A trust used to help the very wealthy leave money to members of their grandchildren's generation without paying the 55% generation-skipping tax.
A trust designed to save on estate tax. The trust principal is preserved for the trust maker's grandchildren, with his or her children receiving only income from the trust. Because the children (the middle generation) never legally own the property, it isn't subject to estate tax at their death. See generation-skipping transfer tax.