What is a generation skipping tax?
Generation Skipping Transfer Tax is 55% tax that may be due — in addition to Estate Tax. This tax is somewhat confusing and often misunderstood. The basic premise behind the generation skipping transfer tax – which is a tax that is separate and apart from income, estate and gift taxes – is to trap transfers of property within each successive generation. In other words, it is designed to allow transfers to spouses and children but tax transfers going to grandchildren and those deemed to be two or more generations below that of the person making the transfer. This tax is very steep – it is a flat 55% of the value of the property transferred. Those who transfer all of their property to someone who is deemed to be in the same or one generation below do not have to worry about this tax. No tax is imposed at this level. In addition, every individual is allowed a $1,000,000 generation skipping transfer tax exemption – no tax is incurred on the first $1,000,000 going to grandchildren and thos
