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any other arrangement (other than an

was married to the donor is assigned to

your grandchildren for purposes of the

estate) that although not explicitly a trust,

the donor’s generation.

GST tax.

has substantially the same effect as a

4. A relationship by adoption or

This special rule may also apply in

trust. For example, trust includes life

half-blood is treated as a relationship by

other cases of the death of a parent of the

estates with remainders, terms for years,

whole-blood.

transferee. If property is transferred to an

and insurance and annuity contracts. A

5. A person who is not assigned to a

individual who is a descendant of a parent

transfer of property that is conditional on

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

of the transferor and that individual’s

the occurrence of an event is a transfer

above is assigned to a generation based

parent (who is a lineal descendant of the

in trust.

on his or her birth date as follows:

parent of the transferor) is dead at the

a. A person who was born not more

Interest in property. If a gift is made to a

time the transfer is subject to gift or estate

than 12

years after the donor is in the

“natural person,” it is always considered a

tax, then for purposes of generation

donor’s generation.

gift of an interest in property for purposes

assignment, the individual is treated as if

b. A person born more than 12

of the GST tax.

he or she is a member of the generation

years, but not more than 37

years, after

that is one generation below the lower of:

If a gift is made to a trust, a natural

•

the donor is in the first generation

The transferor’s generation, or

person will have an interest in the

•

younger than the donor.

The generation assignment of the

property transferred to the trust if that

c. Similar rules apply for a new

youngest living ancestor of the individual

person either has a present right to

generation every 25 years.

who is also a descendant of the parent of

receive income or corpus from the trust

the transferor.

(such as an income interest for life) or is a

If more than one of the rules for

permissible current recipient of income or

The same rules apply to the

assigning generations applies to a donee,

corpus from the trust (for example,

generation assignment of any descendant

that donee is generally assigned to the

possesses a general power of

of the individual.

youngest of the generations that would

appointment).

apply.

This rule does not apply to a transfer

Skip person. A donee who is a natural

to an individual who is not a lineal

If an estate or trust, partnership,

person is a skip person if that donee is

descendant of the transferor if the

corporation, or other entity (other than

assigned to a generation that is two or

transferor at the time of the transfer has

certain charitable organizations and trusts

more generations below the generation

any living lineal descendants.

described in sections 511(a)(2) and

assignment of the donor. See

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

If any transfer of property to a trust

Determining the Generation of a

donee, then each person who indirectly

would have been a direct skip except for

Donee, below.

receives the gift through the entity is

this generation assignment rule, then the

A donee that is a trust is a skip person

treated as a donee and is assigned to a

rule also applies to transfers from the

if all the interests in the property

generation as explained in the above

trust attributable to such property.

transferred to the trust (as defined above)

rules.

Ninety-day rule. For assigning

are held by skip persons.

individuals to generations for purposes of

Charitable organizations and trusts

A trust will also be a skip person if

the generation-skipping transfer (GST)

described in sections 511(a)(2) and

there are no interests in the property

tax, any individual who dies no later than

511(b)(2) and governmental entities are

transferred to the trust held by any

ninety-days after a transfer occurring by

assigned to the donor’s generation.

person, and future distributions or

reason of the death of the transferor is

Transfers to such organizations are

terminations from the trust can be made

treated as having predeceased the

therefore not subject to the GST tax.

only to skip persons.

transferor. The ninety-day rule applies to

These gifts should always be listed in

transfers occurring on or after July 18,

Part 1 of Schedule A.

Nonskip person. A nonskip person is

2005. See Treasury Decision 9214 (T.D.

any donee who is not a skip person.

Charitable Remainder Trusts

9214) for more information.

Determining the Generation of a

Gifts in the form of charitable remainder

Examples

Donee

annuity trusts, charitable remainder

The generation-skipping transfer rules

unitrusts, and pooled income funds are

Generally, a generation is determined

can be illustrated by the following

not transfers to skip persons and

along family lines as follows.

examples.

therefore are not direct skips. You should

1. If the donee is a lineal descendant

always list these gifts in Part 1 of

Example 1. You give your house to

of a grandparent of the donor (for

Schedule A even if all of the life

your daughter for her life with the

example, the donor’s cousin, niece,

beneficiaries are skip persons.

remainder then passing to her children.

nephew, etc.), the number of generations

This gift is made to a “trust” even though

between the donor and the descendant

Generation Assignment Where

there is no explicit trust instrument. The

(donee) is determined by subtracting the

Intervening Parent Is Dead

interest in the property transferred (the

number of generations between the

If you made a gift to your grandchild and

present right to use the house) is

grandparent and the donor from the

at the time you made the gift, the

transferred to a nonskip person (your

number of generations between the

grandchild’s parent (who is your or your

daughter). Therefore, the trust is not a

grandparent and the descendant (donee).

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

skip person because there is an interest

2. If the donee is a lineal descendant

dead, then for purposes of generation

in the transferred property that is held by

of a grandparent of a spouse (or former

assignment, your grandchild is

a nonskip person, and the gift is not a

spouse) of the donor, the number of

considered to be your child rather than

direct skip. The transfer is an indirect

generations between the donor and the

your grandchild. Your grandchild’s

skip, however, because on the death of

descendant (donee) is determined by

children will be treated as your

the daughter, a termination of her interest

subtracting the number of generations

grandchildren rather than your

in the trust will occur that may be subject

between the grandparent and the spouse

great-grandchildren.

to the generation-skipping transfer tax.

(or former spouse) from the number of

See the instructions for Part 3, Schedule

generations between the grandparent and

This rule is also applied to your lineal

A (under Part 3 — Indirect Skips on page

the descendant (donee).

descendants below the level of

9) for a discussion of how to allocate GST

3. A person who at any time was

grandchild. For example, if your

exemption to such a trust.

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

grandchild is dead, your great-

above is assigned to the generation of

grandchildren who are lineal descendants

Example 2. You give $100,000 to

that person. A person who at any time

of the dead grandchild are considered

your grandchild. This gift is a direct skip

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Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2005 Page 7

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