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 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.