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terminations from the trust can be made

These gifts should always be listed in

Regulations section 26.2651-1 for more

only to skip persons.

Part 1 of Schedule A.

information.

Charitable Remainder Trusts

Nonskip person. A nonskip person is

Examples

any donee who is not a skip person.

Gifts in the form of charitable remainder

The GST rules can be illustrated by the

annuity trusts, charitable remainder

following examples.

Determining the Generation of a

unitrusts, and pooled income funds are

Example 1. You give your house to

Donee

not transfers to skip persons and

your daughter for her life with the

Generally, a generation is determined

therefore are not direct skips. You should

remainder then passing to her children.

along family lines as follows.

always list these gifts in Part 1 of

This gift is made to a “trust” even though

Schedule A even if all of the life

1. If the donee is a lineal descendant

there is no explicit trust instrument. The

beneficiaries are skip persons.

of a grandparent of the donor (for

interest in the property transferred (the

example, the donor’s cousin, niece,

present right to use the house) is

Generation Assignment Where

nephew, etc.), the number of generations

transferred to a nonskip person (your

Intervening Parent Is Deceased

between the donor and the descendant

daughter). Therefore, the trust is not a

If you made a gift to your grandchild and

(donee) is determined by subtracting the

skip person because there is an interest

at the time you made the gift, the

number of generations between the

in the transferred property that is held by

grandchild’s parent (who is your or your

grandparent and the donor from the

a nonskip person, and the gift is not a

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

number of generations between the

direct skip. The transfer is an indirect

deceased, then for purposes of

grandparent and the descendant (donee).

skip, however, because on the death of

generation assignment, your grandchild is

2. If the donee is a lineal descendant

the daughter, a termination of her interest

considered to be your child rather than

of a grandparent of a spouse (or former

in the trust will occur that may be subject

your grandchild. Your grandchild’s

spouse) of the donor, the number of

to the GST tax. See the instructions for

children will be treated as your

generations between the donor and the

Part 3, Schedule A (under Part 3 —

grandchildren rather than your

descendant (donee) is determined by

Indirect Skips on page 9) for a discussion

great-grandchildren.

subtracting the number of generations

of how to allocate GST exemption to such

between the grandparent and the spouse

This rule is also applied to your lineal

a trust.

(or former spouse) from the number of

descendants below the level of

Example 2. You give $100,000 to

generations between the grandparent and

grandchild. For example, if your

your grandchild. This gift is a direct skip

the descendant (donee).

grandchild is deceased, your great-

that is not made in trust. You should list it

3. A person who at any time was

grandchildren who are lineal descendants

in Part 2 of Schedule A.

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

of the deceased grandchild are

Example 3. You establish a trust that

above is assigned to the generation of

considered your grandchildren for

is required to accumulate income for 10

that person. A person who at any time

purposes of the GST tax.

years and then pay its income to your

was married to the donor is assigned to

This special rule may also apply in

grandchildren for their lives and upon

the donor’s generation.

other cases of the death of a parent of the

their deaths distribute the corpus to their

4. A relationship by adoption or

transferee. If property is transferred to an

children. Because the trust has no current

half-blood is treated as a relationship by

individual who is a descendant of a parent

beneficiaries, there are no present

whole-blood.

of the transferor and that individual’s

interests in the property transferred to the

5. A person who is not assigned to a

parent (who is a lineal descendant of the

trust. All of the persons to whom the trust

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

parent of the transferor) is deceased at

can make future distributions (including

above is assigned to a generation based

the time the transfer is subject to gift or

distributions upon the termination of

on his or her birth date as follows:

estate tax, then for purposes of

interests in property held in trust) are skip

a. A person who was born not more

generation assignment, the individual is

persons (that is, your grandchildren and

than 12

years after the donor is in the

treated as if he or she is a member of the

great-grandchildren). Therefore, the trust

donor’s generation.

generation that is one generation below

itself is a skip person and you should list

b. A person born more than 12

the lower of:

the gift in Part 2 of Schedule A.

•

years, but not more than 37

years, after

The transferor’s generation or

•

Example 4. You establish a trust

the donor is in the first generation

The generation assignment of the

that pays all of its income to your

younger than the donor.

youngest living ancestor of the individual

grandchildren for 10 years. At the end of

c. Similar rules apply for a new

who is also a descendant of the parent of

10 years, the corpus is to be distributed to

generation every 25 years.

the transferor.

your children. Since for this purpose

The same rules apply to the

interests in trusts are defined only as

If more than one of the rules for

generation assignment of any descendant

present interests, all of the interests in

assigning generations applies to a donee,

of the individual.

this trust are held by skip persons (the

that donee is generally assigned to the

This rule does not apply to a transfer

children’s interests are future interests).

youngest of the generations that would

to an individual who is not a lineal

Therefore, the trust is a skip person and

apply.

descendant of the transferor if the

you should list the entire amount you

If an estate or trust, partnership,

transferor at the time of the transfer has

transferred to the trust in Part 2 of

corporation, or other entity (other than

any living lineal descendants.

Schedule A even though some of the

certain charitable organizations and trusts

trust’s ultimate beneficiaries are nonskip

If any transfer of property to a trust

described in sections 511(a)(2) and

persons.

would have been a direct skip except for

511(b)(2) and governmental entities) is a

this generation assignment rule, then the

Part 1—Gifts Subject Only to

donee, then each person who indirectly

rule also applies to transfers from the

Gift Tax

receives the gift through the entity is

trust attributable to such property.

treated as a donee and is assigned to a

List in Part 1 gifts subject only to the gift

Ninety-day rule. For assigning

generation as explained in the above

tax. Generally, all of the gifts you made to

individuals to generations for purposes of

rules.

your spouse (that are required to be

the GST tax, any individual who dies no

listed, as described earlier), to your

Charitable organizations and trusts,

later than ninety-days after a transfer

children, and to charitable organizations

described in sections 511(a)(2) and

occurring by reason of the death of the

are not subject to the GST tax and

511(b)(2), and governmental entities are

transferor is treated as having

should, therefore, be listed only in Part 1.

assigned to the donor’s generation.

predeceased the transferor. The

Transfers to such organizations are

ninety-day rule applies to transfers

Group the gifts in four categories:

•

therefore not subject to the GST tax.

occurring on or after July 18, 2005. See

Gifts made to your spouse,

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Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2006 Page 7

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