Instructions For Form 706-Gs(T) - 2006 (Page 2 of 6) in pdf

caused the insurance proceeds to be

existence on October 21, 1986, will not

Interest

included in the insured’s gross estate

be considered to result in the creation

A person holds an interest in the trust if,

for federal estate tax purposes if the

of, or an increase in the amount of, a

at the time the determination is made,

insured had died on September 25,

generation-skipping transfer where:

the person:

•

1985.

the amendment is administrative or

1. Has a current right to receive

clarifying in nature, or

income or corpus from the trust,

For more information, see

•

it is designed to perfect a marital or

Regulations section 26.2601-1(b).

2. Is a permissible current recipient

charitable deduction for an existing

of income or corpus from the trust

Trusts containing qualified

transfer, and it only incidentally

(other than charitable entities), or

terminable interest property.

increases the amount transferred to a

3. Is a charitable or other entity

Irrevocable trusts in existence on

skip person.

described in section 2055(a) and the

September 25, 1985, that hold qualified

See Regulations section

trust is a charitable remainder annuity

terminable interest property (QTIP) (as

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

trust, a charitable remainder unitrust, or

defined in section 2056(b)(7)) as a

demonstrating these rules.

a pooled income fund.

result of an election under section

2056(b)(7) or 2523(f), are treated for

Additions to revocable trusts. If an

purposes of the GST tax as if the QTIP

Any interest that is created primarily

addition (including a constructive

election had not been made. Thus,

to postpone or avoid the GST tax is

addition) to a revocable trust is made

transfers from such a trust will not be

disregarded.

after October 21, 1986, and before the

subject to the GST tax.

death of the settlor, all subsequent

Non-Skip Person

Additions to irrevocable trusts. If an

terminations of interests in the trust will

be subject to the GST tax if the other

addition has been made after

A non-skip person is any person who is

requirements of taxability are met. For

September 25, 1985, to an irrevocable

not a skip person.

settlors dying before January 1, 1987,

trust, the termination of any interest in

any addition made to a revocable trust

the trust may be subject in part to the

Generation Assignment

after the death of the settlor will be

GST tax. Additions include constructive

A generation is determined along family

treated as made to an irrevocable trust.

additions described in Regulations

lines as follows:

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

1. Where the beneficiary is a lineal

Transition Rule in Case of

Medical and educational exclusion.

descendant of a grandparent of the

If all of the property to which the

Mental Disability

transferor (for example, the donor’s

termination applied has been

cousin, niece, nephew, etc.), the

If the settlor was under a mental

distributed and used for medical or

disability on October 22, 1986, the GST

number of generations between the

educational expenses of the transferee

tax may not apply. See Regulations

transferor and the descendant is

such that if the transfer had been made

section 26.2601-1(b)(3) for a definition

determined by subtracting the number

inter vivos by an individual, it would not

of generations between the

of mental disability and additional

have been subject to gift tax by reason

grandparent and the transferor from the

details.

of the medical and educational

number of generations between the

exclusion, then the termination is not a

grandparent and the descendant.

Exceptions to Additions Rule

generation-skipping transfer, and you

2. Where the beneficiary is the

do not have to file this form to report

Do not treat as an addition to a trust

lineal descendant of a grandparent of a

the termination.

any addition that is made pursuant to

spouse (or former spouse) of the

an instrument or arrangement that is

Transition Rules for

transferor, the number of generations

covered by the transition rules

between the transferor and the

Revocable Trusts

discussed above under Transition

descendant is determined by

Rules for Revocable Trusts and

The GST tax will not apply to any

subtracting the number of generations

Transition Rule in Case of Mental

termination of an interest in a revocable

between the grandparent and the

Disability. This also applies to inter

trust, provided:

spouse (or former spouse) from the

•

vivos transfers if the same property

The trust was executed before

number of generations between the

would have been added to the trust by

October 22, 1986;

grandparent and the descendant.

•

such an instrument. For examples

The trust as it existed on October 21,

3. For this purpose, a relationship

illustrating this rule, see Regulations

1986, was not amended after October

by adoption is considered a blood

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

21, 1986, in any way that created or

relationship. A relationship by

increased the amount of a

half-blood is considered a relationship

generation-skipping transfer;

Definitions

by whole blood.

•

Except as provided in Exceptions to

4. The spouse or former spouse of

Additions Rule below, no additions

a transferor or lineal descendant is

Skip Persons

were made to the trust; and

considered to belong to the same

•

The settlor died before January 1,

For termination purposes, skip person

generation as the transferor or lineal

1987.

means a trust beneficiary who is either:

descendant, as the case may be.

A revocable trust is any trust that on

1. A natural person assigned to a

5. A person who is not assigned to

October 22, 1986, was not an

generation that is two or more

a generation according to the rules

irrevocable trust, as defined on page 1,

generations below the settlor’s

above is assigned to a generation

and would not have been an

generation, or

based on his or her birth date as

irrevocable trust had it been created

2. A trust that meets either of the

follows:

before September 25, 1985.

following conditions:

a. A person who was born not more

The instructions under Trusts

a. All interests in the trust are held

than 12

years after the transferor is in

containing qualified terminable interest

by skip persons, or

the transferor’s generation;

property above apply also to revocable

b. No person holds an interest in the

b. A person born more than 12

trusts covered by these transition rules.

trust, and at no time after the transfer to

years, but not more than 37

years,

Amendments to revocable trusts. An

the trust may a distribution be made to

after the transferor is in the first

amendment to a revocable trust in

a non-skip person.

generation younger than the transferor;

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Instructions For Form 706-Gs(T) - 2006 Page 2

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