Multi-Generational Planning

In 1986 the Federal government implemented what is known as the Generation Skipping Transfer Tax. This tax is in addition to the estate tax and was designed to eliminate what are known as “dynasty trusts”, or trusts which were only taxed one time but which would remain in effect for multiple generations without an estate tax being imposed at each successive generation. The generation skipping transfer tax  is imposed at the highest Federal estate tax rate on the transfer from a grandparent to a grandchild of an amount above the grandparent’s Federal generation skipping transfer tax exemption (currently $2 million). The Federal estate tax and generation skipping transfer tax, when combined, can result in an effective tax rate of up to 64 percent. We drafts trusts which minimize the generation skipping transfer tax, either by leveraging the client’s generation skipping transfer tax exemption or segregating the exempt amount transferred so that it may grow tax-free for generations to come.