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3. A person who at any time was

This rule is also applied to your lineal

a trust.)

married to a person described in 1 or 2

descendants below the level of

Example 2. You give $100,000 to your

above is assigned to the generation of

grandchild. For example, if your

grandchild. This gift is a direct skip that is

that person. A person who at any time

grandchild is dead, your

not made in trust. You should list it in Part

was married to the donor is assigned to

great-grandchildren who are lineal

2 of Schedule A.

the donor's generation.

descendants of the dead grandchild are

Example 3. You establish a trust that

considered your grandchildren for

4. A relationship by adoption or

is required to accumulate income for 10

purposes of the GST tax.

half-blood is treated as a relationship by

years and then pay its income to your

whole-blood.

This special rule may also apply in

grandchildren for their lives and upon their

other cases of the death of a parent of the

deaths distribute the corpus to their

5. A person who is not assigned to a

transferee. Beginning with gifts made in

children. Because the trust has no current

generation according to 1, 2, 3, or 4

1998, the existing rule that applies to

beneficiaries, there are no present

above is assigned to a generation based

grandchildren of the decedent has been

interests in the property transferred to the

on his or her birth date as follows:

extended to apply to other lineal

trust. All of the persons to whom the trust

a. A person who was born not more

descendants.

can make future distributions (including

than 12

years after the donor is in the

distributions upon the termination of

If property is transferred to an individual

donor's generation.

interests in property held in trust) are skip

who is a descendant of a parent of the

b. A person born more than 12

persons (i.e., your grandchildren and

transferor and that individual's parent

years, but not more than 37

years, after

great-grandchildren). Therefore, the trust

(who is a lineal descendant of the parent

the donor is in the first generation younger

itself is a skip person and you should list

of the transferor) is dead at the time the

than the donor.

the gift in Part 2 of Schedule A.

transfer is subject to gift or estate tax,

c. Similar rules apply for a new

then for purposes of generation

Example 4. You establish a trust that

generation every 25 years.

assignment, the individual is treated as if

pays all of its income to your

If more than one of the rules for

he or she is a member of the generation

grandchildren for 10 years. At the end of

assigning generations applies to a donee,

that is one generation below the lower of:

10 years, the corpus is to be distributed

that donee is generally assigned to the

to your children. Since for this purpose

the transferor's generation or

youngest of the generations that would

interests in trusts are defined only as

the generation assignment of the

apply.

present interests, all of the interests in this

youngest living ancestor of the individual

trust are held by skip persons (the

If an estate or trust, partnership,

who is also a descendant of the parent

children's interests are future interests).

corporation, or other entity (other than

of the transferor.

Therefore, the trust is a skip person and

certain charitable organizations and trusts

The same rules apply to the generation

you should list the entire amount you

described in sections 511(a)(2) and

assignment of any descendant of the

transferred to the trust in Part 2 of

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

individual.

Schedule A even though some of the

donee, then each person who indirectly

This rule does not apply to a transfer

trust's ultimate beneficiaries are nonskip

receives the gift through the entity is

to an individual who is not a lineal

persons.

treated as a donee and is assigned to a

descendant of the transferor if the

generation as explained in the above

Part 1—Gifts Subject Only to Gift

transferor has any living lineal

rules.

descendants.

Tax

Charitable organizations and trusts

If any transfer of property to a trust

List gifts subject only to the gift tax in Part

described in sections 511(a)(2) and

would have been a direct skip except for

1. Generally, all of the gifts you made to

511(b)(2) and governmental entities are

this generation assignment rule, then the

your spouse (that are required to be

assigned to the donor's generation.

rule also applies to transfers from the trust

listed, as described earlier), to your

Transfers to such organizations are

attributable to such property.

children, and to charitable organizations

therefore not subject to the GST tax.

are not subject to the GST tax and should,

These gifts should always be listed in Part

Examples

therefore, be listed only in Part 1.

1 of Schedule A.

The generation-skipping transfer rules

Group the gifts in four categories: gifts

can be illustrated by the following

Charitable Remainder Trusts

made to your spouse; gifts made to third

examples:

parties that are to be split with your

Gifts in the form of charitable remainder

Example 1. You give your house to

annuity trusts, charitable remainder

spouse; charitable gifts (if you are not

your daughter for her life with the

unitrusts, and pooled income funds are

splitting gifts with your spouse); and other

remainder then passing to her children.

not transfers to skip persons and

gifts. If a transfer results in gifts to two or

This gift is made to a “trust” even though

therefore are not direct skips. You should

more individuals (such as a life estate to

there is no explicit trust instrument. The

always list these gifts in Part 1 of

one with remainder to the other), list the

interest in the property transferred (the

Schedule A even if all of the life

gift to each separately.

present right to use the house) is

beneficiaries are skip persons.

Number and describe all gifts (including

transferred to a nonskip person (your

charitable, public, and similar gifts) in the

Generation Assignment Where

daughter). Therefore, the trust is not a

columns provided in Schedule A.

skip person because there is an interest

Intervening Parent Is Dead

Describe each gift in enough detail so that

in the transferred property that is held by

the property can be easily identified, as

If you made a gift to your grandchild and

a nonskip person. The gift is not a direct

explained below.

at the time you made the gift, the

skip and you should list it in Part 1 of

grandchild's parent (who is your or your

For real estate provide:

Schedule A. (However, on the death of

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

A legal description of each parcel;

the daughter, a termination of her interest

dead, then for purposes of generation

in the trust will occur that may be subject

The street number, name, and area if

assignment, your grandchild is considered

to the generation-skipping transfer tax.

the property is located in a city; and

to be your child rather than your

See the instructions for line 5, Part 2,

A short statement of any improvements

grandchild. Your grandchild's children will

Schedule C (on page 10) for a discussion

made to the property.

be treated as your grandchildren rather

of how to allocate GST exemption to such

For bonds, give:

than your great-grandchildren.

The number of bonds transferred;

Page 7

Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2000 Page 7

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