What Is A Generation Skipping Trust (GST)?
Many people want to provide support for family members as part of their estate plan. Grandchildren are among the most common people named as heirs in Last Wills and Testaments and selected as beneficiaries in trusts. In some cases, a specialized type of irrevocable trust called a Generation Skipping Trust (GST) may be the best option for people to provide for their grandchildren. Here, our Greater Boston area estate planning lawyers provides a comprehensive overview of Generation Skipping Trusts (GSTs) in Massachusetts.
Generation Skipping Trust: Know the Basics
As explained by Investopedia, a Generation Skipping Trust (GST) is a type of legal agreement that allows wealth to be passed down from a grantor—the person establishing the trust—to a beneficiary who is two or more generations younger. Most often, the beneficiary is a grandchild or great-grandchild. One of the primary purposes of the GST is to bypass the taxation that would occur when wealth is transferred to the immediate next generation because a grandchild or great-grandchild is taxed in a lower tax bracket.
The Beneficiary Must Be at Least 37.5 Years Younger than the Grantor
The Internal Revenue Service (IRS) stipulates that to qualify as a generation-skipping trust, the trust beneficiary should be at least 37.5 years younger than the person creating the trust. It is a regulation designed to ensure that GSTs serve their original intent: transferring wealth across multiple generations.
There is No Requirement that the Beneficiary is a Family Member
To be clear, while it is common for the beneficiaries of GSTs to be grandchildren or great grandchildren, the law does not mandate that the beneficiary be a family member. The GST could be used to pass wealth onto any individual who meets the age requirement, whether they are related to the grantor or not.
What are the Advantages of a Generation Skipping Trust?
Is a Generation Skipping Trust the right option for your estate plan? The answer depends entirely on the specific circumstances of your case. It is always best to consult with an experienced Boston area estate planning attorney. Here are some of the most notable advantages of a Generation Skipping Trust:
- Tax Efficiency: GSTs can help to mitigate the estate taxes that could otherwise accrue through successive generations. The assets in a GST are subject to federal tax once, not each time they are passed down to the next generation.
- Asset Protection: GSTs can protect assets from creditors, lawsuits, and divorces since the assets are owned by the trust, not the individual beneficiaries.
- Control Over Assets: Grantors can set terms on how and when distributions from the trust are made, allowing them to influence the use of their wealth long after their passing.
- Long-Term Family Wealth Management: GSTs can be designed to last for many generations, thus helping to preserve family wealth over the long term.
Contact Our Boston, MA Trust Planning Attorney Today
At Fisher Law LLC, our Boston estate planning lawyers are a reliable advocate for people and families. If you have any specific questions or concerns about Generation Skipping Trusts, we are here to help. Contact us today for a completely confidential initial consultation. With a law office in Norwood, we provide estate planning representation throughout the Boston area.