A Generation Skipping Trust (“GST Trust”) can be a strategic tool for high net-worth families to pass assets on to future generations while minimizing or, in some cases, eliminating transfer taxes. In a typical non-GST Trust, the Grantor establishes their children as the beneficiaries. This is not always ideal because when the assets pass from the children to their children (the Grantor’s grandchildren), it may be subject to an estate tax with rates currently at 40%. There is also the possibility that the Grantor’s children will make poor financial choices and there will be no assets remaining for the grandchildren. A GST Trust can prevent these types of situations.
When a GST Trust is created, the Grantor not only names their children, but also their grandchildren as eligible beneficiaries of the GST trust (or anyone that is at least 37.5 years younger than the Grantor, i.e., a grandniece or nephew, or even someone not related to the Grantor so long as they meet the age requirements). Therefore, the Trustee can make distributions to the children and grandchildren.
If the Grantor allocates his or her GST exemption to the GST Trust, the assets placed in the GST Trust will not be includable in the Grantor’s children’s estate, but the children can continue to receive distributions from the GST Trust during the child’s lifetime. As of the writing of this article, individuals have a $12.92 million GST exemption that can be utilized during lifetime, and to the extent not utilized during lifetime, then at death.
As with any estate planning instrument, it’s important to evaluate the pros and cons of a GST based on your individual situation.
At Huth, Pratt, and Milhauser, we specialize in creating Estate Plans that will minimize your tax liability and protect your assets for future generations. Each of our plans is customized based on the desires, family situation, and financial situation of each client. Call us today for a free consultation to discuss how we can help you protect your family.
Huth, Pratt and Milhauser
Huth, Pratt and Milhauser is a boutique law firm that offers a wide range of legal services in the specialty areas of wills, trusts, estates, probate, guardianship, and related matters. The range of legal services that Huth, Pratt & Milhauser provides in these specialty areas includes planning, administration and litigation. The experience and skills of our attorneys and staff, coupled with our knowledge of applicable law, enable us to provide outstanding representation to our clients.
Although we are located in South Florida, we proudly serve clients throughout the country and around the world from our Boca Raton offices. We strive to provide superior and focused counsel in a timely manner and at a competitive price.
Huth, Pratt and Milhauser
2500 North Military Trail, Suite 460
Boca Raton, Florida 33431
Phone: 561-392-1800
www.hpmlawyers.com
2500 North Military Trail, Suite 460
Boca Raton, Florida 33431
Phone: 561-392-1800
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