Tax Planning/How to calculate Generation Skipping Transfer Tax?
I honestly googled GSTT. Geeee. hard to understand. It says double, but from what basis? I will try to make really simple #s. Pls give me general idea how to calculate this? Grandpa placed CA house in revocable trust. $400K in 2012. Grandkids (three: 10,4,2 yrs) are beneficiaries. I am (father, skipped generation) is trustee. Trust says: corpus to be distributed equally among beneficiaries after my (beneficiaries' father, settlor's son) death. Say. Grandpa will die in 2040. House value at this time $500K. I will die in 2060. House value at this time $600K. How much beneficiaries will pay? Grandpa is Non resident alien; he is not allowed same # of deductions as US citizens. Only 60K is deductible. Kids and I are citizens. As I got it, grandkids will have to pay double: estate tax + GSTT (at higher rate -- about 40%). Is it like: $600K minus $60 and two time 40%?
Sorry, you are way out of my comfort zone with this question. In general the IRS can only tax transactions that it can "see". Putting assets in a trust usually removes them from the tax cycle - no probate. On the other side, even with probate, a certain amount is protected from tax - depends on federal, state and local laws - so you'll have to check. Many times the inheritance tax doesn't kick in until the amount is very high - you might spend a few minutes with the lawyer who put the trust together to get your answers. RS