What is a Generation Skipping Trust?
This type of trust allows the grantor to pass assets to grandchildren or their descendants, thus "skipping" a generation or more. If the amount is placed in trust during lifetime, limits are imposed under the Gift Tax law and much less can be put into the trust. Nevertheless, this planning technique prevents the assets and the appreciation of those assets from being taxed at the death of the grantor and for generations to come.
Who should use a Generation Skipping Trust?
Like most types of trusts, generation-skipping trusts are most effective when used in combination with other trust vehicles. These trusts tend to be quite complicated, and must be developed with extreme flexibility to accommodate changing tax laws and family situations that may occur through the years.