This is the third tax in the "transfer" of assets. The gift tax and estate tax form the other two. The GST is intended to keep people from cutting gift and estate taxes by transferring assets to people who are two generations or more younger than they are (in other words, skipping a generation or more). The rules are very complex. Contact us; we will be happy to discuss the details with you.
A transfer tax generally assessed on transfers to grandchildren, great grandchildren and others who are at least two generations younger than the donor.
A transfer tax imposed at a rate equal to the highest estate tax rate (currently 50%) on gifts or estate transfers where the transferred assets pass, or will pass, to recipients two or more generations below the donor, without being subject to the imposition of estate tax at the intervening generations. Each donor has an exemption of $1,120,000 (in 2003, $1,500,000 in 2004) from the tax.
A steep tax (48% in 2004) on assets that "skip" a generation and are left directly to grandchildren and younger generations. Everyone has an exemption from this tax. In 2004, the GSTT exemption is $1,500,000.
A steep tax (50% in 2002) on assets that "skip" a generation and are left directly to grandchildren and younger generations. Everyone has an exemption from this tax. In 2002, the GSTT exemption is $1,100,000.
This tax, the GST tax, could come into play if you want to leave your assets in a way that will benefit your grandchildren or other persons more than a generation younger than you. The GST tax rate is very high, equal to the highest federal estate tax rate. GST must be paid in addition to estate and gift tax. The GST tax exemption is currently the same value as the estate tax exemption. As the estate tax exemption increases, the GST tax exemption rises also. A GST EXEMPT TRUST CAN AVOID GST TAX. Multi-generational trusts must plan around the GST tax to avoid confiscatory taxation. Life insurance is an excellent way to leverage the GST tax exemption.
A federal tax imposed on certain transfers, either by gift or at death, between a donor/decedent and a person more than one generation removed (e.g., a grandchild). Currently the tax rate is a flat 47% on all such transfers; however, each individual currently has a $2,000,000 exemption available from the GST tax. The GST Tax is scheduled to be abolished in 2010, but reinstated in 2011.
The IRS got tired of people leaving assets to their grandchildren, rather than their children, and reducing the amount of estate taxes. So, in 1976, Congress developed this tax on transfers that attempt to skip a generation. The tax is a 55% tax IN ADDITION to the Federal Estate and Gift tax
A flat 55 percent federal tax levied on any transfers, either during lifetime or at death, made to beneficiaries or others at least two generations below the transferor. This tax is assessed in addition to other taxes, such as estate or gift taxes.