Regardless of what form an arrangement may take (whether, for example, a life insurance trust or an agreement with the insurer for payment of proceeds under settlement options, or an outright payment to a beneficiary), if an insured (or annuitant) transfers benefits to a "skip person," (see Q 951), generally, he has made a generation-skipping transfer
As with the federal estate tax, unless Congress changes the tax law the generation-skipping transfer
tax has been terminated for decedents dying in 2010 but is scheduled to return in 2011.
The federal generation-skipping transfer
(GST) tax is a tax on the right to transfer property to a skip person (a person two or more generations (see Q 1512) younger than the transferor).
Despite its fearsome reputation, the generation-skipping transfer
tax (GSTT) is straightforward in its provisions and worth the attention of CPA planning advisers, especially in the currently unsettled political climate.
This chapter discusses the generation-skipping transfer
tax and planning with generation-skipping transfers
, including the use of generation-skipping trusts.
For affluent grandparents who have earmarked a portion of their wealth to create a legacy for future generations, the dynasty trust can provide a legacy for grandchildren while avoiding unnecessary estate, gift and generation-skipping transfer
David Pratt of Pratt & Bucher, LLP, spoke at the Greater Fort Lauderdale Tax Council meeting; his speech was entitled "The Anatomy of the New Federal Gift Tax Return, Including a Review of the Gift Tax Statute of Limitations, Gift Splitting Provisions and Proposed Regulations Regarding the Election out of the Automatic Allocation of Generation-Skipping Transfer
Entitled Report on Reform of Federal Wealth Transfer Taxes and developed by the Task Force on Federal Wealth Transfer Taxes, it assesses--on the basis of simplicity, compliance, and consistency of enforcement--the temporary repeal of the estate and generation-skipping transfer
taxes, the phase-out period, the continuation of the gift tax after repeal, the modified carryover basis rule and the alternatives to federal wealth transfer tax repeal.
The 2003 edition includes significant changes to the estate, gift, and generation-skipping transfer
taxes made by the Economic Growth and Tax Relief Reconciliation Act of 2001; 96 issues on the expanded coverage of the powers of attorney; 100 tips on long-term trusts; and an all new section on estate tax issues involving insurance.
Chapters cover: income taxes; gift taxes; estate taxes; generation-skipping transfer
taxes; the Tax Act and liberalized GST rules; recent Tax Act changes; benefits of an Irrevocable Life Insurance Trust; drafting for changing circumstances; coordination with other estate planning documents; and, advanced planning techniques.
The top gift, estate and generation-skipping transfer
(GST) tax rate is reduced from 55% to 50%.
The Tax Act added section 2632(c) to Chapter 13 of the IRC, which provides that any gifts to a generation-skipping transfer
(GST) trust will receive an automatic allocation of a donor's GST tax exemption in an amount necessary to exempt the trust from the GST tax.