Instructions For Form 709 - 2007 (Page 7 of 12) in pdf

To determine if a gift “is of an interest

3. A person who at any time was

of the deceased grandchild are

in property” and “is made to a skip

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

considered your grandchildren for

person,” you must first determine if the

above is assigned to the generation of

purposes of the GST tax.

donee is a “natural person” or a “trust” as

that person. A person who at any time

This special rule may also apply in

defined below.

was married to the donor is assigned to

other cases of the death of a parent of the

the donor’s generation.

Trust. For purposes of the GST tax, trust

transferee. If property is transferred to an

4. A relationship by adoption or

includes not only an explicit trust, but also

individual who is a descendant of a parent

half-blood is treated as a relationship by

any other arrangement (other than an

of the transferor and that individual’s

whole-blood.

estate) that although not explicitly a trust,

parent (who is a lineal descendant of the

5. A person who is not assigned to a

has substantially the same effect as a

parent of the transferor) is deceased at

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

trust. For example, trust includes life

the time the transfer is subject to gift or

above is assigned to a generation based

estates with remainders, terms for years,

estate tax, then for purposes of

on his or her birth date as follows:

and insurance and annuity contracts. A

generation assignment, the individual is

transfer of property that is conditional on

a. A person who was born not more

treated as if he or she is a member of the

the occurrence of an event is a transfer

than 12

years after the donor is in the

generation that is one generation below

in trust.

donor’s generation.

the lower of:

•

b. A person born more than 12

The transferor’s generation or

Interest in property. If a gift is made to

•

years, but not more than 37

years, after

The generation assignment of the

a natural person, it is always considered a

the donor is in the first generation

youngest living ancestor of the individual

gift of an interest in property for purposes

younger than the donor.

who is also a descendant of the parent of

of the GST tax.

c. Similar rules apply for a new

the transferor.

If a gift is made to a trust, a natural

generation every 25 years.

The same rules apply to the

person will have an interest in the

generation assignment of any descendant

property transferred to the trust if that

If more than one of the rules for

of the individual.

person either has a present right to

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

If an estate or trust, partnership,

possesses a general power of

any living lineal descendants.

corporation, or other entity (other than

appointment).

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

Ninety-day rule. For assigning

Determining the Generation of a

generation as explained in the above

individuals to generations for purposes of

Donee below.

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

assigned to the donor’s generation.

A trust will also be a skip person if

ninety-day rule applies to transfers

Transfers to such organizations are

there are no interests in the property

occurring on or after July 18, 2005. See

therefore not subject to the GST tax.

transferred to the trust held by any

Regulations section 26.2651-1 for more

These gifts should always be listed in

person, and future distributions or

information.

Part 1 of Schedule A.

terminations from the trust can be made

Examples

Charitable Remainder Trusts

only to skip persons.

The GST rules can be illustrated by the

Gifts in the form of charitable remainder

Nonskip person. A nonskip person is

following examples.

annuity trusts, charitable remainder

any donee who is not a skip person.

unitrusts, and pooled income funds are

Example 1. You give your house to

Determining the Generation of a

not transfers to skip persons and

your daughter for her life with the

Donee

therefore are not direct skips. You should

remainder then passing to her children.

always list these gifts in Part 1 of

Generally, a generation is determined

This gift is made to a “trust” even though

Schedule A even if all of the life

there is no explicit trust instrument. The

along family lines as follows.

beneficiaries are skip persons.

interest in the property transferred (the

1. If the donee is a lineal descendant

present right to use the house) is

of a grandparent of the donor (for

Generation Assignment Where

transferred to a nonskip person (your

example, the donor’s cousin, niece,

Intervening Parent Is Deceased

daughter). Therefore, the trust is not a

nephew, etc.), the number of generations

If you made a gift to your grandchild and

skip person because there is an interest

between the donor and the descendant

at the time you made the gift, the

in the transferred property that is held by

(donee) is determined by subtracting the

grandchild’s parent (who is your or your

a nonskip person, and the gift is not a

number of generations between the

spouse’s or your former spouse’s child) is

direct skip. The transfer is an indirect

grandparent and the donor from the

deceased, then for purposes of

skip, however, because on the death of

number of generations between the

generation assignment, your grandchild is

the daughter, a termination of her interest

grandparent and the descendant (donee).

considered to be your child rather than

in the trust will occur that may be subject

2. If the donee is a lineal descendant

your grandchild. Your grandchild’s

to the GST tax. See the instructions for

of a grandparent of a spouse (or former

children will be treated as your

Part 3, Schedule A (under Part 3 —

spouse) of the donor, the number of

grandchildren rather than your

Indirect Skips on page 9) for a discussion

generations between the donor and the

great-grandchildren.

of how to allocate GST exemption to such

descendant (donee) is determined by

a trust.

subtracting the number of generations

This rule is also applied to your lineal

between the grandparent and the spouse

descendants below the level of

Example 2. You give $100,000 to

(or former spouse) from the number of

grandchild. For example, if your

your grandchild. This gift is a direct skip

generations between the grandparent and

grandchild is deceased, your great-

that is not made in trust. You should list it

the descendant (donee).

grandchildren who are lineal descendants

in Part 2 of Schedule A.

-7-

Instructions For Form 709 - 2007 Page 7

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