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niece, nephew, etc.), the number of

he or she is a member of the generation

has no current beneficiaries, there are no

generations between the decedent and

that is one generation below the lower of:

present interests in the property

•

the beneficiary is determined by

The transferor’s generation; or

transferred to the trust. All of the persons

•

subtracting the number of generations

The generation assignment of the

to whom the trust can make future

between the grandparent and the

youngest living ancestor of the individual,

distributions (including distributions upon

decedent from the number of generations

who is also a descendant of the parent of

the termination of interests in property

between the grandparent and the

the transferor.

held in trust) are skip persons (for

beneficiary.

example, the decedent’s grandchildren

The same rules apply to the

2. Where the beneficiary is a lineal

and great-grandchildren). Therefore, the

generation assignment of any descendant

descendant of a grandparent of a spouse

trust itself is a skip person and you should

of the individual.

(or former spouse) of the decedent, the

show the transfer on Schedule R.

This rule does not apply to a transfer

number of generations between the

4. The will establishes a trust that is to

to an individual who is not a lineal

decedent and the beneficiary is

pay all of its income to the decedent’s

descendant of the transferor if the

determined by subtracting the number of

grandchildren for 10 years. At the end of

transferor has any living lineal

generations between the grandparent and

10 years, the corpus is to be distributed to

descendants.

the spouse (or former spouse) from the

the decedent’s children. All of the present

number of generations between the

If any transfer of property to a trust

interests in this trust are held by skip

would have been a direct skip except for

grandparent and the beneficiary.

persons. Therefore, the trust is a skip

3. A person who at any time was

this generation assignment rule, then the

person and you should show this transfer

rule also applies to transfers from the

married to a person described in (1) or (2)

on Schedule R. You should show the

above is assigned to the generation of

trust attributable to such property.

estate tax value of all the property

that person. A person who at any time

transferred to the trust even though the

Ninety-day rule. For assigning

was married to the decedent is assigned

trust has some ultimate beneficiaries who

individuals to generations for purposes of

to the decedent’s generation.

are non-skip persons.

the generation-skipping transfer (GST)

4. A relationship by adoption or

tax, any individual who dies no later than

Dividing Direct Skips Between

half-blood is treated as a relationship by

ninety-days after a transfer occurring by

whole-blood.

Schedules R and R-1

reason of the death of the transferor is

5. A person who is not assigned to a

treated as having predeceased the

generation according to (1), (2), (3), or (4)

Report all generation-skipping

transferor. The ninety-day rule applies to

above is assigned to a generation based

TIP

transfers on Schedule R unless

transfers occurring on or after July 18,

on his or her birth date, as follows:

the rules below specifically

2005. See Treasury Decision 9214 (T.D.

provide that they are to be reported on

a. A person who was born not more

9214), for more information.

Schedule R-1.

than 12

years after the decedent is in

Charitable organizations. Charitable

the decedent’s generation.

Under section 2603(a)(2), the GST tax

organizations and trusts described in

b. A person born more than 12

on direct skips from a trust (as defined for

sections 511(a)(2) and 511(b)(2) are

years, but not more than 37

years, after

GST tax purposes on page 21) is to be

assigned to the decedent’s generation.

the decedent is in the first generation

paid by the trustee and not by the estate.

Transfers to such organizations are

younger than the decedent.

Schedule R-1 serves as a notification

therefore not subject to the GST tax.

c. A similar rule applies for a new

from the executor to the trustee that a

Charitable remainder trusts.

generation every 25 years.

GST tax is due.

Transfers to or in the form of charitable

For a direct skip to be reportable on

remainder annuity trusts, charitable

If more than one of the rules for

Schedule R-1, the trust must be includible

remainder unitrusts, and pooled income

assigning generations applies to a

in the decedent’s gross estate.

funds are not considered made to skip

transferee, that transferee is generally

persons and, therefore, are not direct

If the decedent was the surviving

assigned to the youngest of the

skips even if all of the life beneficiaries

spouse life beneficiary of a marital

generations that would apply.

are skip persons.

deduction power of appointment (or

If an estate, trust, partnership,

QTIP) trust created by the decedent’s

Estate tax value. Estate tax value is the

corporation, or other entity (other than

spouse, then transfers caused by reason

value shown on Schedules A through I of

certain charitable organizations and trusts

of the decedent’s death from that trust to

this Form 706.

described in sections 511(a)(2) and

skip persons are direct skips required to

Examples. The rules above can be

511(b)(2)) is a transferee, then each

be reported on Schedule R-1.

illustrated by the following examples:

person who indirectly receives the

If a direct skip is made “from a trust”

1. Under the will, the decedent’s

property interests through the entity is

under these rules, it is reportable on

house is transferred to the decedent’s

treated as a transferee and is assigned to

Schedule R-1 even if it is also made “to a

daughter for her life with the remainder

a generation as explained in the above

trust” rather than to an individual.

passing to her children. This transfer is

rules. However, this look-through rule

Similarly, if property in a trust (as

made to a “trust” even though there is no

does not apply for the purpose of

defined for GST tax purposes on page

explicit trust instrument. The interest in

determining whether a transfer to a trust

21) is included in the decedent’s gross

the property transferred (the present right

is a direct skip.

estate under section 2035, 2036, 2037,

to use the house) is transferred to a

Generation assignment where

2038, 2039, 2041, or 2042 and such

non-skip person (the decedent’s

intervening parent is dead. A special

property is, by reason of the decedent’s

daughter). Therefore, the trust is not a

rule may apply in the case of the death of

death, transferred to skip persons, the

skip person because there is an interest

a parent of the transferee. For

transfers are direct skips required to be

in the transferred property that is held by

terminations, distributions, and transfers

reported on Schedule R-1.

a non-skip person. The transfer is not a

after December 31, 1997, the existing rule

direct skip.

Special rule for trusts other than

that applied to grandchildren of the

2. The will bequeaths $100,000 to the

explicit trusts. An “explicit trust” is a

decedent has been extended to apply to

decedent’s grandchild. This transfer is a

trust as defined in Regulations section

other lineal descendants.

direct skip that is not made in trust and

301.7701-4(a) as “an arrangement

If property is transferred to an

should be shown on Schedule R.

created by a will or by an inter vivos

individual who is a descendant of a parent

3. The will establishes a trust that is

declaration whereby trustees take title to

of the transferor, and that individual’s

required to accumulate income for 10

property for the purpose of protecting or

parent (who is a lineal descendant of the

years and then pay its income to the

conserving it for the beneficiaries under

parent of the transferor) is dead at the

decedent’s grandchildren for the rest of

the ordinary rules applied in chancery or

time the transfer is subject to gift or estate

their lives and, upon their deaths,

probate courts.” Direct skips from explicit

tax, then for purposes of generation

distribute the corpus to the decedent’s

trusts are required to be reported on

assignment, the individual is treated as if

great-grandchildren. Because the trust

Schedule R-1 regardless of their size

-22-

Instructions for Schedules

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2005 Page 22

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