My accountant told me not to leave money to my grandchildren because the tax would be too high. Was he correct?
That depends on the size of your estate. The generation-skipping transfer tax (GSTT) applies, on top of Federal Estate Tax, to certain amounts of money left to third-generation beneficiaries. So it might apply to money you leave to your grandchildren, to nieces and nephews, and so on. This tax, however, only applies to transfers over an exempted amount. That amount is $2 million in 2008 and $3.5 million in 2009. The tax will be repealed in 2010, but will apply again in 2011 to amounts over $1 million.
When it does apply, the GSTT is the highest tax the federal government assesses, so you don’t want it applied to your bequest to your grandchildren or other third-generation heirs. The GSTT is VERY complicated, and it is not something anyone but an estate tax expert should try and figure out for him or herself. If you want to leave money to your grandchildren consult a qualified estate tax attorney for advice.
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