Generation-Skipping Transfer Tax (GSTT)
The GSTT is a 40% federal tax on transfers to persons two or more generations below the transferor, designed to prevent families from avoiding estate taxes by skipping generations.
Exam Tip
GSTT = 40% on transfers to skip persons (2+ generations below). Exemption same as estate but SEPARATE. Know: Direct skip, Taxable termination, Taxable distribution.
What is GSTT?
The GSTT closes a loophole that allowed families to avoid estate tax by transferring directly to grandchildren.
GSTT Basics (2025/2026)
| Component | 2025 | 2026 |
|---|---|---|
| GST Exemption | $13.99M | $15M |
| GST Tax Rate | 40% | 40% |
| Married Couple | $27.98M | $30M |
Types of Transfers
| Type | When Tax Applies |
|---|---|
| Direct Skip | At transfer |
| Taxable Termination | At termination |
| Taxable Distribution | At distribution |
ETIP Rules
Cannot allocate GST exemption during GRAT/QPRT terms.
Study This Term In
Related Terms
Dynasty Trust
A dynasty trust is an irrevocable trust designed to last multiple generations (perpetually in some states), sheltering assets from estate, gift, and GST taxes across generations.
Unified Credit (Estate Tax Exemption)
The unified credit is a federal tax credit that exempts a specified amount of assets from estate and gift taxes during a person's lifetime and at death, set at $13.99 million for 2025 and $15 million for 2026 per individual.
Grantor Retained Annuity Trust (GRAT)
A GRAT is an irrevocable trust where the grantor transfers assets and retains the right to receive fixed annuity payments for a specified term, with any appreciation above the IRS Section 7520 hurdle rate passing to beneficiaries gift-tax-free.
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