Transcript GSTT

Generation Skipping Transfer Tax
 Purpose
 History
 Overview
1
Generation Skipping Transfer
Tax
Grandparent
Income for life
Corpus
•Discretion
•Ascertainable standard
•5 & 5 power
•Limited power
Assets
Children
Grandchildren
Great Grandchildren
2
GST Players
 Transferor - 2652
decedent / donor
reverse Qtip / 2044 (c)
 skip person - 2613 (a)(1)
 non-skip person - 2613 (b)
 trust as beneficiary 2613 (a)(2)
3
GSTT
Non-skip
Skip
C1, C2
GC1, GC2, GC3
GC1, GC2, GC3
4
GST Events
 2611 / 2612
 taxable distribution
 taxable termination
 direct skip (See 2515)
 excluded transfers
5
GSTT
 taxable amount x applicable rate
(2602)
 taxable amount
wealth transfer (2621, 2622, 2623,
2603)
assume FMV date of transfer
6
GSTT (cont.)
 applicable rate (2641)
max rate x inclusion ratio
result is 0% - 55%
7
GSTT (cont.)
 Inclusion ratio (2642)
1 - applicable fraction
applicable fraction =
GST
exemption allocation (2631)
__________________________
value of skip property
between 0 and 1
2642 (c)
8
Maria
 1 - _________
$1,060,000
= .74
$4,000,000
 55% x .74 = 40.7%
 $5,500,000 x 40.7% = $2,238,500
 Would you do this?
9
Generation Skipping Transfer
Tax
Grandparent
Income for life
Corpus
•Discretion
•Ascertainable standard
•5 & 5 power
•Limited power
Assets
Children
Grandchildren
Great Grandchildren
10
GSTT
Exempt
Nonexempt
$1,060,000
$2,940,000
•Incl. Ratio = 0
•Growth
•Don’t invade
•Incl. Ratio = 1
•Income
•Invade for children and to
children for grandchildren
•Possible testamentary GPA
for child if estate tax rate is
lower
11
GSTT
Termination
$2,000,000
•0% rate
One trust
Two trusts
Savings
$3,500,000
•55% rate (lower if GPA)
•Tax = $1,925,00
$2,238,500
1,925,000
$ 313,500
12
GSTT
Reverse QTIP (2652 (a) (3))
Assume H dies in 2001 with a $5,000,000 net estate
Marital
Credit Shelter
Regular $4,325,000
Marital
$675,000
GST QTIP
Reverse
$3,940,000
QTIP
$385,000
13
Credit Shelter
$675,000