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inter vivos by an individual, it would not

tax may not apply. See Regulations

grandparent and the transferor from the

have been subject to gift tax by reason

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

number of generations between the

of the medical and educational

of the term “mental disability” and

grandparent and the descendant.

exclusion, then the termination is not a

additional details.

2. Where the beneficiary is the

generation-skipping transfer, and you

lineal descendant of a grandparent of a

Exceptions to Additions Rule

do not have to file this form to report

spouse (or former spouse) of the

Do not treat as an addition to a trust

the termination.

transferor, the number of generations

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

Revocable Trusts

covered by the transition rules

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)(4)(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

5. A person who is not assigned to

1987.

means a trust beneficiary who is either:

a generation according to the rules

A revocable trust is any trust that on

1. A natural person assigned to a

above is assigned to a generation

October 22, 1986, was not an

generation that is two or more

based on his or her birth date as

irrevocable trust, as defined on page 1,

generations below the settlor’s

follows.

and would not have been an

generation, or

a. 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.

The instructions under Trusts

a. All interests in the trust are held

b. A person born more than 12

containing qualified terminable interest

by skip persons, or

years, but not more than 37

years,

property on page 1 apply also to

b. No person holds an interest in the

after the transferor is in the first

revocable trusts covered by these

trust, and at no time after the transfer to

generation younger than the transferor.

transition rules.

the trust may a distribution be made to

c. Similar rules apply for a new

a non-skip person.

Amendments to revocable trusts.

generation every 25 years.

An amendment to a revocable trust in

Interest

existence on October 21, 1986, will not

If more than one of the rules for

be considered to result in the creation

assigning generations applies to a

A person holds an interest in the trust if,

of, or an increase in the amount of, a

beneficiary, the beneficiary is generally

at the time the determination is made,

generation-skipping transfer where:

assigned to the youngest of the

the person:

•

The amendment is administrative or

generations that apply.

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

Any interest that is created primarily

Government entities and certain

demonstrating these rules.

to postpone or avoid the GST tax is

charitable organizations are assigned to

Additions to revocable trusts. If an

disregarded.

the transferor’s generation.

addition (including a constructive

Terminations in their favor will never be

Non-Skip Person

addition) to a revocable trust is made

generation-skipping transfers.

after October 21, 1986, and before the

A non-skip person is any person who is

death of the settlor, all subsequent

not a skip person.

Generation Assignment

terminations of interests in the trust will

Where Intervening Parent is

Generation Assignment

be subject to the GST tax if the other

Deceased

requirements of taxability are met. For

A generation is determined along family

settlors dying before January 1, 1987,

lines as follows:

If you made a gift or bequest to your

any addition made to a revocable trust

1. Where the beneficiary is a lineal

grandchild and at the time you made

after the death of the settlor will be

descendant of a grandparent of the

the gift or bequest, the grandchild’s

treated as made to an irrevocable trust.

transferor (for example, the donor’s

parent (who is your or your spouse’s or

cousin, niece, nephew, etc.), the

your former spouse’s child) is

Transition Rule in Case of

number of generations between the

deceased, then for purposes of

Mental Disability

transferor and the descendant is

generation assignment, your grandchild

If the settlor was under a mental

determined by subtracting the number

will be considered to be your child

disability on October 22, 1986, the GST

of generations between the

rather than your grandchild. Your

-2-

Instructions For Form 706-Gs(T) - Generation-Skipping Transfer Tax Return For Terminations - 2008 Page 2

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