Looking for a Form 706 Templates? Download it for free!

treated for purposes of the GST tax as

October 21, 1986, in any way that

examples illustrating this rule, see

if the QTIP election had not been

created or increased the amount of a

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

made. Thus, transfers from such a trust

generation-skipping transfer;

will not be subject to the GST tax.

3. Except as provided below, no

Definitions

addition was made to the trust; and

Additions to irrevocable trusts. To

4. The settlor died before January 1,

Skip persons. For GST tax purposes,

the extent that a distribution from a trust

1987.

skip person means:

is from an addition to an irrevocable

trust made after September 25, 1985,

1. A natural person assigned to a

A revocable trust is any trust that on

such distribution is subject to the GST

generation that is two or more

October 22, 1986, was not an

tax. Additions include constructive

generations below the settlor’s

irrevocable trust (as defined above) and

additions described in Regulations

generation, or

would not have been an irrevocable

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

2. A trust that meets the following

trust had it been created before

conditions:

For purposes of figuring the inclusion

September 25, 1985.

ratio (defined on page 4), use only the

a. All interests in the trust are held

The instructions under Trusts

value of the total additions made to the

by skip persons, or

containing qualified terminable interest

trust after September 25, 1985.

b. No person holds an interest in the

property on page 1 apply also to

trust, and at no time after the transfer to

Distributions from trusts to which

revocable trusts covered by these

the trust may a distribution be made to

additions have been made. As

transition rules.

a non-skip person.

described above, when an addition is

Amendments to revocable trusts. An

made after September 25, 1985, to an

amendment to a revocable trust in

Non-skip person. A non-skip person

irrevocable trust, only the portion of the

existence on October 21, 1986, will not

is any person who is not a skip person.

trust resulting from the addition is

be considered to result in the creation

subject to the GST tax. For

of or an increase in the amount of a

Generation assignment. A generation

distributions, this portion is the product

generation-skipping transfer where:

is determined along family lines as

of the allocation fraction and the value

•

The amendment is administrative or

follows:

of the property distributed (including

clarifying in nature or

1. Where the beneficiary is a lineal

accumulated income and appreciation

•

It is designed to perfect a marital or

descendant of a grandparent of the

on that property).

charitable deduction for an existing

transferor (for example, the donor’s

The allocation fraction is a fraction,

transfer, and it only incidentally

cousin, niece, nephew, etc.), the

the numerator of which is the value of

increases the amount transferred to a

number of generations between the

the addition as of the date it was made

skip person.

transferor and the descendant is

(regardless of whether it was subject to

Addition to revocable trusts. If an

determined by subtracting the number

gift or estate tax). The denominator of

addition (including a constructive

of generations between the

the fraction is the fair market value of

addition) to a revocable trust is made

grandparent and the transferor from the

the entire trust immediately after the

after October 21, 1986, and before the

number of generations between the

addition, less any trust amount that is

death of the settlor, all subsequent

grandparent and the descendant.

similar to expenses, indebtedness, or

distributions from the trust will be

2. Where the beneficiary is the

taxes that would be allowable as a

subject to the GST tax, provided the

lineal descendant of a grandparent of a

deduction under section 2053.

other requirements of taxability are met.

spouse (or former spouse) of the

When there is more than one

For settlors dying before January 1,

transferor, the number of generations

addition, the allocation fraction is

1987, any addition made to a revocable

between the transferor and the

revised after each addition. The

trust after the death of the settlor will be

descendant is determined by

numerator of the revised fraction is the

treated as if made to an irrevocable

subtracting the number of generations

sum of:

trust.

between the grandparent and the

spouse (or former spouse) from the

1. The value of the trust subject to

See Regulations section

number of generations between the

the GST tax immediately before the last

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

grandparent and the descendant.

addition and

demonstrating the operation of these

2. The amount of the latest addition.

3. For this purpose, a relationship

rules.

by adoption is considered a blood

Transition Rule in Case of

The denominator of the revised

relationship. A relationship by

fraction is the total value of the entire

Mental Disability

half-blood is considered a relationship

trust immediately after the latest

by whole blood.

If the settlor was under a disability on

addition. If the addition results from a

4. The spouse or former spouse of

October 22, 1986, the GST tax may not

generation-skipping transfer, reduce the

a transferor or lineal descendant is

apply. See Regulations section

numerator and denominator by the

considered to belong to the same

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

amount of any GST tax imposed on the

generation as the transferor or lineal

term “mental disability” and details on

transfer and recovered from the trust.

descendant, as the case may be.

the application of this rule.

Round off the allocation fraction to five

5. A person who is not assigned to

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

Exceptions to Additions Rule

a generation according to the rules

above is assigned to a generation

Transition Rule for

Do not treat as an addition to a trust

based on his or her birth date as

any addition that is made pursuant to

Revocable Trusts

follows:

an instrument or arrangement that is

The GST tax will not apply to any

a. A person who was born not more

covered by the rules discussed above

distributions from a revocable trust,

than 12

years after the transferor is in

under Transition Rule for Revocable

provided:

the transferor’s generation;

Trusts and Transition Rule in Case of

1. The trust was executed before

Mental Disability. This also applies to

b. A person born more than 12

October 22, 1986;

inter vivos transfers if the same

years, but not more than 37

years,

2. The trust as it existed on October

property would have been added to the

after the transferor is in the first

21, 1986, was not amended after

trust by such an instrument. For

generation younger than the transferor;

-2-

Form 706-Gs(D-1) - 2007 - Instructions For Skip Person Distributee - Department Of The Treasury - Internal Revenue Service Page 3

Related Articles

Related forms

Related Categories