Instructions For Form 709 - 2009 Page 7

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the occurrence of an event is a transfer
a. A person who was born not more
treated as if he or she is a member of the
in trust.
than 12
/
years after the donor is in the
generation that is one generation below
1
2
donor’s generation.
the lower of:
Interest in property. If a gift is made to
b. A person born more than 12
1
/
The transferor’s generation or
2
a natural person, it is always considered a
years, but not more than 37
1
/
years, after
The generation assignment of the
2
gift of an interest in property for purposes
the donor is in the first generation
youngest living ancestor of the individual
of the GST tax.
younger than the donor.
who is also a descendant of the parent of
If a gift is made to a trust, a natural
c. Similar rules apply for a new
the transferor.
person will have an interest in the
generation every 25 years.
The same rules apply to the
property transferred to the trust if that
generation assignment of any descendant
person either has a present right to
If more than one of the rules for
of the individual.
assigning generations applies to a donee,
receive income or corpus from the trust
This rule does not apply to a transfer
that donee is generally assigned to the
(such as an income interest for life) or is a
to an individual who is not a lineal
youngest of the generations that would
permissible current recipient of income or
descendant of the transferor if the
apply.
corpus from the trust (for example,
transferor at the time of the transfer has
possesses a general power of
If an estate or trust, partnership,
any living lineal descendants.
appointment).
corporation, or other entity (other than
If any transfer of property to a trust
certain charitable organizations and trusts
Skip person. A donee, who is a natural
would have been a direct skip except for
described in sections 511(a)(2) and
person, is a skip person if that donee is
this generation assignment rule, then the
511(b)(2) and governmental entities) is a
assigned to a generation that is two or
rule also applies to transfers from the
donee, then each person who indirectly
more generations below the generation
trust attributable to such property.
receives the gift through the entity is
assignment of the donor. See
treated as a donee and is assigned to a
Determining the Generation of a
Ninety-day rule. For assigning
generation as explained in the above
Donee below.
individuals to generations for purposes of
rules.
the GST tax, any individual who dies no
A donee that is a trust is a skip person
later than 90 days after a transfer
Charitable organizations and trusts,
if all the interests in the property
occurring by reason of the death of the
described in sections 511(a)(2) and
transferred to the trust (as defined above)
transferor is treated as having
511(b)(2), and governmental entities are
are held by skip persons.
predeceased the transferor. The 90-day
assigned to the donor’s generation.
A trust will also be a skip person if
rule applies to transfers occurring on or
Transfers to such organizations are
there are no interests in the property
after July 18, 2005. See Regulations
therefore not subject to the GST tax.
transferred to the trust held by any
section 26.2651-1 for more information.
These gifts should always be listed in
person, and future distributions or
Part 1 of Schedule A.
Examples
terminations from the trust can be made
Charitable Remainder Trusts
The GST rules can be illustrated by the
only to skip persons.
following examples.
Gifts in the form of charitable remainder
Nonskip person. A nonskip person is
annuity trusts, charitable remainder
Example 1. You give your house to
any donee who is not a skip person.
unitrusts, and pooled income funds are
your daughter for her life with the
Determining the Generation of a
not transfers to skip persons and
remainder then passing to her children.
Donee
therefore are not direct skips. You should
This gift is made to a “trust” even though
always list these gifts in Part 1 of
there is no explicit trust instrument. The
Generally, a generation is determined
Schedule A even if all of the life
interest in the property transferred (the
along family lines as follows.
beneficiaries are skip persons.
present right to use the house) is
1. If the donee is a lineal descendant
transferred to a nonskip person (your
Generation Assignment Where
of a grandparent of the donor (for
daughter). Therefore, the trust is not a
example, the donor’s cousin, niece,
Intervening Parent Is Deceased
skip person because there is an interest
nephew, etc.), the number of generations
If you made a gift to your grandchild and
in the transferred property that is held by
between the donor and the descendant
at the time you made the gift, the
a nonskip person, and the gift is not a
(donee) is determined by subtracting the
grandchild’s parent (who is your or your
direct skip. The transfer is an indirect
number of generations between the
spouse’s or your former spouse’s child) is
skip, however, because on the death of
grandparent and the donor from the
deceased, then for purposes of
the daughter, a termination of her interest
number of generations between the
generation assignment, your grandchild is
in the trust will occur that may be subject
grandparent and the descendant (donee).
considered to be your child rather than
to the GST tax. See the instructions for
2. If the donee is a lineal descendant
your grandchild. Your grandchild’s
Part 3, Schedule A (under Part
of a grandparent of a spouse (or former
children will be treated as your
3 — Indirect Skips on page 9) for a
spouse) of the donor, the number of
grandchildren rather than your
discussion of how to allocate GST
generations between the donor and the
great-grandchildren.
exemption to such a trust.
descendant (donee) is determined by
This rule is also applied to your lineal
Example 2. You give $100,000 to
subtracting the number of generations
descendants below the level of
your grandchild. This gift is a direct skip
between the grandparent and the spouse
grandchild. For example, if your
that is not made in trust. You should list it
(or former spouse) from the number of
grandchild is deceased, your great-
in Part 2 of Schedule A.
generations between the grandparent and
grandchildren who are lineal descendants
the descendant (donee).
Example 3. You establish a trust that
of the deceased grandchild are
3. A person who at any time was
is required to accumulate income for 10
considered your grandchildren for
married to a person described in (1) or (2)
years and then pay its income to your
purposes of the GST tax.
above is assigned to the generation of
grandchildren for their lives and upon
that person. A person who at any time
This special rule may also apply in
their deaths distribute the corpus to their
was married to the donor is assigned to
other cases of the death of a parent of the
children. Because the trust has no current
the donor’s generation.
transferee. If property is transferred to an
beneficiaries, there are no present
4. A relationship by adoption or
individual who is a descendant of a parent
interests in the property transferred to the
half-blood is treated as a relationship by
of the transferor and that individual’s
trust. All of the persons to whom the trust
whole-blood.
parent (who is a lineal descendant of the
can make future distributions (including
5. A person who is not assigned to a
parent of the transferor) is deceased at
distributions upon the termination of
generation according to (1), (2), (3), or (4)
the time the transfer is subject to gift or
interests in property held in trust) are skip
above is assigned to a generation based
estate tax, then for purposes of
persons (that is, your grandchildren and
on his or her birth date as follows:
generation assignment, the individual is
great-grandchildren). Therefore, the trust
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