generation-skipping trust

Definition

A trust that passes property and/or money to a trustor's grandchild(ren) upon the death of the trustor. The purpose of a generation-skipping trust is to exempt some or all of a trustor's estate from estate taxes that are levied on assets passed directly to children. The children of the trustor may still have access to income generated by the trust depending on the specifics of the trust document. The grandchildren are required to pay a generation-skipping tax on assets over a certain dollar amount (5 million as of 2011) as beneficiaries of an estate held in a generation-skipping trust.

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You may want to put in a generation-skipping trust if you want to make sure that your grand children are taken care of.

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In order to minimize his heirs' tax liability, Carl created a generation-skipping trust so that his grandchildren, nine in all, would receive most of his estate.

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My grandfather set-up a generation-skipping trust that left his entire estate to my sister and me, which not only meant my abusive father did not inherit any money but it also meant that we did not have pay estate taxes.

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