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Married Person GST Trust

 

The Married Person Generation Skipping Tax (GST) RLT provides all the benefits of a Married Person QTIP Trust and a few additional features. It is a Sole-Grantor trust designed for a married individual intending to make distributions of principal to any “skip” persons such as grandchildren etc.

A skip person is a person considered to be a second-generation person to the grantor who was vested by the trust when the skip-person’s parent (or other 1st generation person) is alive when the grantor died. A transfer to a skip person always means that a transfer tax could not be levied on the death of the first generation person. Therefore, by federal legislative reasoning, a generation who should have paid transfer tax was “skipped” by the original transferor (the grantor); and so an additional tax, the generation skipping transfer tax (GSTT), needs to be levied on the estate for generation skipping transfer purposes. 

As mentioned, the GSTT is an additional tax (additional to estate tax) on assets transferred to skip persons. When compiled with the estate tax, a generation skipping transfer creating a GSTT effectively prohibits such transfers because of its proportionately large tax bite. However, each grantor/transferor is allowed a $1,000,000 exclusion from GST taxes (adjusted for inflation in increments of $10,000).

A GST Trust can be an effective planning tool for the grantor wanting to provide a means of support to his/her spouse and/or children with outright allocations and distributions eventually going to grandchildren (or even great-grandchildren). However, if allowed by trust decree, much of the principal that would otherwise eventually go to the skip persons can be used if necessary for the lifetime benefit of the grantor’s children and/or spouse for the duration of their lifetimes. Additionally, it can serve to provide significant asset protection on behalf of the skip generation (1st generation children) while still providing generous benefits to them out of the trust estate.

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