You’ve worked hard to build your wealth, and you’d like to keep it in your family after you’re gone. Of course, you also want to minimize the estate taxes owed by your loved ones.
One means of doing that is through a generation-skipping trust (GST). Let’s look at what this trust is and what it can do for your family.
Who can be a beneficiary of a GST?
A GST is a trust in which the assets are set aside for the grantor’s grandchildren or others who are separated from the grantor by at least two generations and at least 37 ½ years younger than the grantor. Note that the beneficiary cannot be a current or former spouse.
Even though the grantor’s children can’t be the direct beneficiaries of a GST, it can be structured in a way that they’re able to receive any income that the trust generates. The principal, however, must remain untouched by anyone other than the designated beneficiaries.
What is the generation-skipping transfer tax?
A GST isn’t always completely free from taxation. A generation-skipping transfer tax (GSTT) was added to the tax code back in the 1980s. In 2021, a beneficiary of a GST has to pay it if the amount left to them exceeds $11.7 million. While Washington State has a its own estate tax, it does not impose a GSTT.
Determining how to pass down your assets to your children, spouse, other family members and worthy organizations is an endeavor that requires a good deal of thought and planning. An experienced estate planning attorney can help you make the decisions that are best for your family and your legacy.