Skip Person

Skip Person

The transfer of a property to a person two or more generations younger than the person making the transfer. This may trigger a taxable event.
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The transfers likewise may have been subject to GST tax because the determination of whether the transfer is to a skip person was based on the age difference between the spouses.
Non-skip person: Any person or trust that is not a skip person,
These are transfers to a skip person that are subject to the estate tax or the gift tax.
So, for example, if you had a pot trust that was not GST-exempt but could make distributions to a grandchild or other skip person, a lot of clients or trustees would have made those distributions to grandchildren to shift assets out, because even if it was a GST transfer, there was no GST tax.
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 7578) younger than the transferor).
Any transfer is generally not subject to the GSTT if the person in the intervening generation (the child) is not alive at the time of the transfer to the skip person (the grandchild).
A taxable distribution occurs when a trust makes a distribution to a skip person, and the distribution is not subject to estate or gift tax.
On the other hand, if all the beneficiaries of a trust are skip persons, a transfer to a trust for such people would be considered a transfer to a skip person.
Thirdly, a client may wish to make direct transfers to a grandchild or other skip person for the beneficiary's support or enjoyment, or in order to avoid tax in the estate of the intervening generation.
The first, a "direct skip," is a gift or bequest to a skip person or a trust that benefits only skip persons.
Question 506 tells us that a "skip person" is a person who is two or more generations younger than the person making the transfer, and that a trust will be treated as a skip person if it can benefit only a skip person.