Instructions For Form 706-Gs(D-1) (Page 3 of 6) in pdf

Definitions

been made. Thus, transfers from such

created or increased the amount of a

a trust will not be subject to the GST

generation-skipping transfer;

Skip persons. For GST tax purposes,

tax.

3. Except as provided below, no

skip person means:

addition was made to the trust; and

Additions to irrevocable trusts. To

4. The settlor died before January 1,

1. A natural person assigned to a

the extent that a distribution from a trust

1987.

generation that is two or more

is from an addition to an irrevocable

generations below the settlor’s

trust made after September 25, 1985,

A revocable trust is any trust that on

generation, or

such distribution is subject to the GST

October 22, 1986, was not an

2. A trust that meets the following

tax. Additions include constructive

irrevocable trust (as defined above) and

conditions:

additions described in Regulations

would not have been an irrevocable

a. All interests in the trust are held

section 26.2601-1(b)(1)(v).

trust had it been created before

by skip persons, or

For purposes of figuring the inclusion

September 25, 1985.

b. No person holds an interest in the

ratio (defined below), use only the

trust, and at no time after the transfer to

The instructions under Trusts

value of the total additions made to the

the trust may a distribution be made to

containing qualified terminable interest

trust after September 25, 1985.

a non-skip person.

property apply also to revocable trusts

Distributions from trusts to which

covered by these transition rules.

Non-skip person. A non-skip person

additions have been made. As

Amendments to revocable trusts.

is any person who is not a skip person.

described above, when an addition is

An amendment to a revocable trust in

made after September 25, 1985, to an

Generation assignment. A

existence on October 21, 1986, will not

irrevocable trust, only the portion of the

generation is determined along family

be considered to result in the creation

trust resulting from the addition is

lines as follows:

of or an increase in the amount of a

subject to the GST tax. For

generation-skipping transfer where:

1. Where the beneficiary is a lineal

distributions, this portion is the product

•

The amendment is administrative or

descendant of a grandparent of the

of the allocation fraction and the value

clarifying in nature or

transferor (for example, the donor’s

of the property distributed (including

•

It is designed to perfect a marital or

cousin, niece, nephew, etc.), the

accumulated income and appreciation

charitable deduction for an existing

number of generations between the

on that property).

transfer, and it only incidentally

transferor and the descendant is

The allocation fraction is a fraction,

increases the amount transferred to a

determined by subtracting the number

the numerator of which is the value of

skip person.

of generations between the

the addition as of the date it was made

grandparent and the transferor from the

Addition to revocable trusts. If an

(regardless of whether it was subject to

number of generations between the

addition (including a constructive

gift or estate tax). The denominator of

grandparent and the descendant.

addition) to a revocable trust is made

the fraction is the fair market value of

2. Where the beneficiary is the

after October 21, 1986, and before the

the entire trust immediately after the

lineal descendant of a grandparent of a

death of the settlor, all subsequent

addition, less any trust amount that is

spouse (or former spouse) of the

distributions from the trust will be

similar to expenses, indebtedness, or

transferor, the number of generations

subject to the GST tax, provided the

taxes that would be allowable as a

between the transferor and the

other requirements of taxability are met.

deduction under section 2053.

descendant is determined by

For settlors dying before January 1,

subtracting the number of generations

When there is more than one

1987, any addition made to a revocable

between the grandparent and the

addition, the allocation fraction is

trust after the death of the settlor will be

spouse (or former spouse) from the

revised after each addition. The

treated as if made to an irrevocable

number of generations between the

numerator of the revised fraction is the

trust.

grandparent and the descendant.

sum of:

See Regulations section

3. For this purpose, a relationship

1. The value of the trust subject to

26.2601-1(b)(2)(vii) for examples

by adoption is considered a blood

the GST tax immediately before the last

demonstrating the operation of these

relationship. A relationship by

addition and

rules.

half-blood is considered a relationship

2. The amount of the latest addition.

by whole blood.

Transition Rule in Case of

4. The spouse or former spouse of

The denominator of the revised

Mental Disability

a transferor or lineal descendant is

fraction is the total value of the entire

If the settlor was under a disability on

considered to belong to the same

trust immediately after the latest

October 22, 1986, the GST tax may not

generation as the transferor or lineal

addition. If the addition results from a

apply. See Regulations section

descendant, as the case may be.

generation-skipping transfer, reduce the

26.2601-1(b)(3) for a definition of the

numerator and denominator by the

A person who is not assigned to a

term “mental disability” and details on

amount of any GST tax imposed on the

generation according to the rules above

the application of this rule.

transfer and recovered from the trust.

is assigned to a generation based on

Round off the allocation fraction to five

Exceptions to Additions Rule

his or her birth date as follows.

decimal places (for example, “.00001”).

Do not treat as an addition to a trust

1. A person who was born not more

Transition Rule for

any addition that is made pursuant to

than 12

years after the transferor is in

an instrument or arrangement that is

the transferor’s generation.

Revocable Trusts

covered by the rules discussed above

2. A person born more than 12

The GST tax will not apply to any

under Transition Rule for Revocable

years, but not more than 37

years,

distributions from a revocable trust,

Trusts and Transition Rule in Case of

after the transferor is in the first

provided:

Mental Disability. This also applies to

generation younger than the transferor.

1. The trust was executed before

inter vivos transfers if the same

3. Similar rules apply for a new

October 22, 1986;

property would have been added to the

generation every 25 years.

2. The trust as it existed on October

trust by such an instrument. For

21, 1986, was not amended after

examples illustrating this rule, see

If more than one of the rules for

October 21, 1986, in any way that

Regulations section 26.2601-1(b)(4)(ii).

assigning generations applies to a

-2-

Instructions For Form 706-Gs(D-1) Page 3

Related Articles

Related forms

Related Categories