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Exemption From Generation Skipping Transfer Taxes


Definition: The amount that can be directly transferred to grandchildren or into a generation skipping trust for the benefit of children without incurring a federal generation skipping transfer tax. The generation skipping transfer tax also applies to transfers to someone who is not related to the transferor but is 37 1/2 years or more younger than the transferor. In addition, many states that collect state estate taxes also collect state generation skipping transfer taxes. Check with your state taxing authority to be sure.

Under the provisions of the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010, the federal generation skipping transfer tax was repealed for 2010 but came back in 2011 with a $5,000,000 exemption and 35% tax rate. In 2012 the federal generation skipping transfer tax exemption increased to $5,120,000 and the tax rate remained the same. In 2013, under the provisions of the American Taxpayer Relief Act, the exemption increased to $5,250,000 and the tax rate increased to 40%. In 2014 and future years, the exemption amount will continue to be indexed for inflation and the tax rate will remain at 40%. The 2014 generation-skipping transfer tax exemption as indexed for inflation is $5,340,000.

For historical federal generation skipping transfer tax exemption amounts, refer to Chart Showing Federal Generation Skipping Transfer Tax Exemption: 1997 - 2014

Also Known As: Generation Skipping Exemption, Generation Skipping Transfer Tax Exemption, GST Exemption, GSTT Exemption

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