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additions described in Regulations

after the death of the settlor will be

1. Where the beneficiary is a lineal

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

treated as made to an irrevocable trust.

descendant of a grandparent of the

transferor (for example, the donor’s

Medical and educational exclusion.

Transition Rule in Case of

cousin, niece, nephew, etc.), the

If all of the property to which the

number of generations between the

Mental Disability

termination applied has been

transferor and the descendant is

distributed and used for medical or

If the settlor was under a mental

determined by subtracting the number

educational expenses of the transferee

disability on October 22, 1986, the GST

of generations between the

such that if the transfer had been made

tax may not apply. See Regulations

grandparent and the transferor from the

inter vivos by an individual, it would not

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

number of generations between the

have been subject to gift tax by reason

of the term “mental disability” and

grandparent and the descendant.

of the medical and educational

additional details.

2. Where the beneficiary is the

exclusion, then the termination is not a

lineal descendant of a grandparent of a

generation-skipping transfer, and you

Exceptions to Additions Rule

spouse (or former spouse) of the

do not have to file this form to report

Do not treat as an addition to a trust

transferor, the number of generations

the termination.

any addition that is made pursuant to

between the transferor and the

Transition Rule for

an instrument or arrangement that is

descendant is determined by

covered by the transition rules

Revocable Trusts

subtracting the number of generations

discussed above under Transition Rule

between the grandparent and the

The GST tax will not apply to any

for Revocable Trusts and Transition

spouse (or former spouse) from the

termination of an interest in a revocable

Rule in Case of Mental Disability. This

number of generations between the

trust, provided:

also applies to inter vivos transfers if

grandparent and the descendant.

•

The trust was executed before

the same property would have been

3. For this purpose, a relationship

October 22, 1986;

added to the trust by such an

by adoption is considered a blood

•

The trust as it existed on October 21,

instrument. For examples illustrating

relationship. A relationship by

1986, was not amended after October

this rule, see Regulations section

half-blood is considered a relationship

21, 1986, in any way that created or

26.2601-1(b)(5)(ii).

by whole blood.

increased the amount of a

4. The spouse or former spouse of

generation-skipping transfer;

Definitions

a transferor or lineal descendant is

•

Except as provided in Exceptions to

considered to belong to the same

Additions Rule below, no additions

generation as the transferor or lineal

Skip Persons

were made to the trust; and

descendant, as the case may be.

•

The settlor died before January 1,

For termination purposes, skip person

1987.

means a trust beneficiary who is either:

A person who is not assigned to a

A revocable trust is any trust that on

1. A natural person assigned to a

generation according to the rules above

October 22, 1986, was not an

generation that is two or more

is assigned to a generation based on

irrevocable trust, as defined previously,

generations below the settlor’s

his or her birth date as follows:

and would not have been an

generation, or

1. A person who was born not more

irrevocable trust had it been created

2. A trust that meets either of the

than 12

years after the transferor is in

before September 25, 1985.

following conditions:

the transferor’s generation.

a. All interests in the trust are held

The instructions under Trusts

2. A person born more than 12

by skip persons, or

containing qualified terminable interest

years, but not more than 37

years,

b. No person holds an interest in the

property, previously, apply also to

after the transferor is in the first

trust, and at no time after the transfer to

revocable trusts covered by these

generation younger than the transferor.

the trust may a distribution be made to

transition rules.

3. Similar rules apply for a new

a non-skip person.

generation every 25 years.

Amendments to revocable trusts.

An amendment to a revocable trust in

If more than one of the rules for

Interest

existence on October 21, 1986, will not

assigning generations applies to a

be considered to result in the creation

A person holds an interest in the trust if,

beneficiary, the beneficiary is generally

of, or an increase in the amount of, a

at the time the determination is made,

assigned to the youngest of the

generation-skipping transfer where:

the person:

•

generations that apply.

The amendment is administrative or

1. Has a current right to receive

clarifying in nature, and it only

If an entity such as a partnership,

income or corpus from the trust,

incidentally increases the amount

corporation, trust, or estate has an

2. Is a permissible current recipient

transferred to a skip person (defined

interest in property, each individual who

of income or corpus from the trust

below), or

has a beneficial interest in the entity

(other than charitable entities), or

•

It is designed to perfect a marital or

(for example, partners, shareholders,

3. Is a charitable or other entity

charitable deduction for an existing

and beneficiaries) is treated as having

described in section 2055(a) and the

transfer, and it only incidentally

an interest in the property. The

trust is a charitable remainder annuity

increases the amount transferred to a

individual is then assigned to a

trust, a charitable remainder unitrust, or

skip person (defined below).

generation using the rules described

a pooled income fund.

See Regulations section

above.

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

Government entities and certain

Any interest that is created primarily

demonstrating these rules.

charitable organizations are assigned to

to postpone or avoid the GST tax is

Additions to revocable trusts. If an

the transferor’s generation.

disregarded.

addition (including a constructive

Terminations in their favor will never be

addition) to a revocable trust is made

Non-Skip Person

generation-skipping transfers.

after October 21, 1986, and before the

A non-skip person is any person who is

Generation Assignment

death of the settlor, all subsequent

not a skip person.

terminations of interests in the trust will

Where Intervening Parent is

be subject to the GST tax if the other

Generation Assignment

Deceased

requirements of taxability are met. For

settlors dying before January 1, 1987,

A generation is determined along family

If you made a gift or bequest to your

any addition made to a revocable trust

lines as follows:

grandchild and at the time you made

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Instructions For Form 706-Gs(T) - Generation-Skipping Transfer Tax Return For Terminations - Internal Revenue Service - 2011 Page 2

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