Generation Skipping Tax & Dynasty Trusts
Generation Skipping Transfer Tax
In 1986 Congress passed a tax law which included enactment of the federal generation skipping transfer tax (GST). In a nutshell, the GST only permits an individual to pass a certain amount of money to someone more than one generation removed from him/her without incurring a tax on the transfer. The tax on the transfer is in addition to any estate tax that might have to be paid and is generally at the same rate as the estate tax rate. The purpose of the GST is to prevent individuals with large estates from escaping estate taxes by skipping generations.