“GST” tax refers to the federal generation-skipping transfer tax. In general, the GST tax applies to the transfer of property (during life or at death) to grandchildren or more remote descendants. However, every taxpayer has an exemption from the GST tax. By funding a GST trust (also called a “dynasty trust”) and using your GST exemption, you can make property available to your children, grandchildren, or more remote descendants in a way that will avoid transfer taxes that may otherwise apply to your children’s estates. In other words, the estate tax is “skipped” at the death of the children. Right now, we have a very generous GST exemption of $5 million. Under current federal law, the GST exemption will decrease to $1 million in 2013. Therefore, 2012 is an excellent time to consider creating a GST trust.
Nancy E. Kennedy
Ryan, Swanson & Cleveland, PLLC
1201 3rd Avenue, Suite 3400, Seattle, WA 98101