Tenth of an Hour, Episode 92: GST Trust Additions, Severances, and Transferor Shifts

Описание: Trusts that are exempt from the generation-skipping transfer (GST) tax don't always stay completely exempt, forever. Additions to the trust (including constructive additions subject to the gift or estate tax) can change the inclusion ratio of the trust if sufficient GST exemption is not allocated at the time of the addition.


Even where no property is added to a trust, a beneficiary can become the "transferor" for GST tax purposes, as might be the case if the beneficiary dies holding a general power of appointment or exercises a limited power of appointment in a taxable manner.


These events can create calculation headaches, as distributions must be allocated proportionately between the old trust principal/income and the new trust principal/income. However, with a qualified severance, the trust can be split into one or more parts that are exempt from the GST tax (with a zero inclusion ratio) and one or more parts that are non-exempt (with an inclusion ratio of one and a GST tax rate of 40% on distributions and terminations).