Generation-Skipping Transfer Tax(p11)

The GST tax may apply to gifts or direct skips occurring at your death to skip persons. The GST tax is calculated on the value of the gift or bequest, after subtraction of any allocated GST exemption, at the maximum estate tax rate for the year involved. Each individual has a GST exemption equal to the applicable exclusion amount for the year involved.

A direct skip is a transfer made during your life or occurring at your death that is:

• Subject to the gift or estate tax,
• Of an interest in property, and
• Made to a skip person.

A skip person is generally a person who is assigned to a generation that is two or more generations below the generation assignment of the donor. For instance, your grandchild will generally be a skip person to you or your spouse. The GST tax is computed on the amount of the gift or bequest transferred to a skip person, after subtraction of any GST exemption allocated to the gift or bequest at the maximum gift and estate tax rates.

If you think you will have a gift or bequest on which GST tax must be paid, see Form 709, Form 706, Form 706-NA, and the forms' instructions for more information. You can get publications and forms from the IRS website, www.irs.gov. You (or your estate) may want to get a qualified estate tax professional to help with the GST questions.