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Generation Transfer Skipping Tax

Individuals thinking about gifting money may have encountered generation transfer skipping tax questions. Uncertainties on who would incur generation skipping transfer tax or who may be exempt from generation skipping tax often lead to questions like the ones answered below by the Experts.

If a single person makes a substantial gift to a grandchild and still is within the lifetime exclusion, is there any Federal gift tax to pay or Is there generation transfer skipping tax?

As long as an individual has not used up their lifetime limit then there would be no gift tax. Any amount that would go over the annual exclusion amount of $13,000 would need to be reported but no gift tax would be incurred. The generation skipping transfer tax might apply to any gifts during your life or transfers occurring at your death. These are called bequests that are made to skip persons. A skip person would belong to a generation that is two or could be more generations below the generation of the donor.

Regarding generation skipping transfer tax, are the annuities worth $500,000 and the house worth $700,000 subject to these taxes if my spouse’s parent passes?

If the transfer were to occur during your in-laws lifetime then they would need to file a United States Gift (and Generation-Skipping Transfer) Tax return. If the transfer is made after the death then it would not be subject of generation skipping tax.

My client is an 84 year old widow worth in excess of $20 million. The widow has never used any gift tax exemptions and never had children only 20 great nieces and nephews who are heirs. What would be the advantages of using generation skipping if she has 2 million in stock?

Since your client did not have any children of their own, the transfers of their estate to heirs (nieces and nephews) would not incur any generation transfer skipping tax. The nieces and nephews would not be classified as skip persons.

Can parents minimize or avoid estate tax by generation skipping, if so how is it done?

Before the generation skip tax property could be transferred in trust to a child for life and then the property could transfer to grandchildren without incurring gift or even estate tax or the property could go directly to the grandchild but would be subject to a single estate or gift tax because of a direct skip. The latter avoided taxation on the child’s generation.

When I get money as a gift from a parent, what is the tax rate on that?

Individuals that are receiving the gift do not pay any taxes on the amount received. Donors of the gift are the ones that would incur tax if applicable. The annual gift tax exclusion amount is $13,000 or $26,000 if married filing joint. Your parent would need to file Form 706 the United States Estate (and Generation-Skipping Transfer) Tax Return.

Knowing the right facts and having a good insight of generation transfer skipping tax can help when faced with situations involving generation skip tax. Experts can help answer who may be responsible for the generation skip tax or if there are ways to avoid the generation skip tax. Get the answers fast and affordably by asking an Expert.

Ask a Tax Professional

Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: General
Satisfied Customers: 572
Experience:  10 years experience
16356563
Type Your Tax Question Here...
characters left:
5 Tax Professionals are Online Now

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Tax Professionals are online & ready to help you now

Wallstreet Esq.
Tax Attorney
Satisfied Customers: 570
10 years experience
Wendy Reed
Enrolled Agent
Satisfied Customers: 3052
15+ years tax preparation and tax advice.
Mark D
Enrolled Agent
Satisfied Customers: 985
MBA, EA, Specializing in Business and Individual Tax Returns and Issues

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