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What is the Generation Skipping Transfer Tax (GST)?
Generation Skipping Transfer (GST) Tax is repealed as of the year 2010 but reapplies in its entirety as of 2011. Until 2010, the exemption amount will be the same as the estate tax exemption amount.
The Generation Skipping Transfer Tax is 45% in 2007 through 2009.
The basic Estate Tax is designed to tax assets when they are passed from one generation to another, such as a parent to a child. The generation-skipping tax ("GST" in estate-planning jargon) on the other hand, is designed to impose tax on those who the Government has figured are attempting to circumvent the Government’s expectation that it will collect more Estate Tax sooner rather than later, and by-pass the usual "leave it directly to your children", and, instead, leave the inheritance to someone in the next generation – hence "the skip". A simple example is that of a grandparent leaving money to a grandchild where the grandchild’s parent is still alive, leaving out the middle generation. But GST can also apply in non-family situations -- GST may be due if a beneficiary of a gift or estate is 37.5 years younger than the donor or deceased.)
Individuals also have a life-time exemption of $2 million in 2006 ($4,000,000 for married couples). Beginning in 2009, the exemption amount will be $3,500,000 and unlimited in 2010.
Gifts given outright that qualify for the $12,000 in 2006. Gift Tax exclusion are shielded from the GST as are education and medical expenses. |
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