Family Office Definition: Generation-Skipping Trust
Generation-Skipping Trust definition: A trust established to provide income for the next generation (children), while the skip generation (grandchildren) are beneficiaries of the trust principal. The trust is set up to avoid estate taxes when the income beneficiaries die because they never directly owned the property held in trust. When the trust is funded at the generation skipping transfer tax exemption amount or less, the final beneficiaries (grandchildren) do not have to pay generation skipping-transfer taxes regardless of appreciation in those assets above exemption limits. The trust is included in the taxable estate of the grantor and subject to estate taxes, just not at the middle generation (child) level.
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