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Member
 
Group: Forum Members
Last Login: 1/3/2012 10:46:42 AM
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Taxpayer created a Trust for her grandchild in 1989, made a gift of $600,000 to the Trust, and filed Gift tax return.
Do I understand this correctly? Is this Trust ignored for GST purposes?
As I read the explanation, up to $2,000,000 could have been gifted via trust from Grandparent to Grandchild, prior to 1990, and that amount was not considered a skip for GST purposes.
Therefore, Taxpayer still retains her full GST exemption, which is now $2,000,000.
Am I reading this correctly? Thanks. Bill Downs
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Member
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Last Login: 10/4/2007 4:49:42 PM
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BNA Portfolio 850-1st on Generation Skipping Tax, para I.C. of the detailed analysis, says sthat the TRA of 1986 reformed Chapter 13 and allowed a $2Million per grandchild exclusion for direct skips made before 1990. You would have to see if the gift to your client's trust was a "direct skip". For transfers to trusts made after 3/31/1988 to qualify as a direct skip, the trust had to meet the two criteria set out in Section 2642(c)(2), i.e. (1) the trust is exclusively for the benefit of one beneficiary during that beneficiary's life and (2) the trust is includible in that beneficiary's gross estate if death occurs prior to the termination of the trust.
Carol Ach
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Member
Group: Forum Members
Last Login: 1/3/2012 10:46:42 AM
Posts: 42,
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Thanks, Carol,
It appears that this trust was created to take advantage of that provision of the law back in 1989, to use grantor's full gift tax exemption at that time, and also to avoid GST.
Very smart.
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