Solving GenerationSkipping Transfer Tax Problems
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Five Practical Remedies to Resolve Exemption Allocation Issues By Carol Warley, Abbie M. B. Everist, Amber Waldman, and Rachel Ruffalo
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he intricacies of estate planning often bring to light a range of complex tax considerations, including the generation-skipping transfer tax (GSTT). Understanding the implications associated with the imposition of the GSTT is crucial when reviewing an estate plan, as it can significantly affect the distribution of wealth and the preservation of family assets. The allocation of a transferor’s generation-skipping tax (GST) exemption protects transfers from the GSTT. The inclusion ratio of a trust, calculated under IRC § 2642(a), determines the portion of the trust assets that is subject to GSTT. The 40 percent flat GSTT is imposed on three triggering events: (1) a direct skip with no remaining GST exemption available under section 2612(c), (2) a taxable distribution from a trust with an inclusion ratio other than 0.000 under section 2612(b), and (3) a taxable termination of a trust with an inclusion ratio other than 0.000 under section 2612(a). Carol Warley is RSM’s Washington National Tax private client services tax practice leader. Abbie M. B. Everist, Amber Waldman, and Rachel Ruffalo are members of RSM’s Washington National Tax practice.
Published in Probate & Property, Volume 38, No 1 © 2024 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
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