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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

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Richard S


My expertise is in collecting past due taxes and tax returns. While at the IRS I worked on wage and bank levies, liens, Offer in Compromise, late filing and payment agreements every day. I spoke with over 20,000 people concerning their issues while I worked there (just retired).


Ten years working for the the IRS in Collections and tax return review. Worked with over 20,000 people on their IRS issues. Explained their options and usually worked out a solution while they were on the phone.

Masters Degree from Iowa State in Ames.

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