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trusts in existence on September 25,

of, or an increase in the amount of, a

b. No person holds an interest in the

1985, that hold qualified terminable

generation-skipping transfer where:

trust, and at no time after the transfer to

interest property (QTIP) (as defined in

The amendment is administrative or

the trust may a distribution be made to a

section 2056(b)(7)) as a result of an

clarifying in nature, and it only

non-skip person.

election under section 2056(b)(7) or

incidentally increases the amount

Interest

2523(f), are treated for purposes of the

transferred to a skip person (defined

A person holds an interest in the trust if,

GST tax as if the QTIP election had not

below), or

at the time the determination is made,

been made. Thus, transfers from such a

It is designed to perfect a marital or

the person:

trust will not be subject to the GST tax.

charitable deduction for an existing

transfer, and it only incidentally

1. Has a current right to receive

Additions to irrevocable trusts. If an

increases the amount transferred to a

income or corpus from the trust;

addition has been made after

skip person (defined later).

September 25, 1985, to an irrevocable

2. Is a permissible current recipient

See Regulations section 26.2601-1(b)

trust, the termination of any interest in

of income or corpus from the trust (other

(2)(vii) for examples demonstrating

the trust may be subject in part to the

than charitable entities); or

these rules.

GST tax. Additions include constructive

3. Is a charitable or other entity

additions described in Regulations

Additions to revocable trusts. If an

described in section 2055(a) and the

section 26.2601-1(b)(1)(v).

addition (including a constructive

trust is a charitable remainder annuity

addition) to a revocable trust is made

trust, a charitable remainder unitrust, or

Medical and educational exclusion.

after October 21, 1986, and before the

a pooled income fund.

If all of the property to which the

death of the settlor, all subsequent

termination applied has been distributed

Any interest that is created primarily

terminations of interests in the trust will

and used for medical or educational

to postpone or avoid the GST tax is

be subject to the GST tax if the other

expenses of the transferee such that if

disregarded.

requirements of taxability are met. For

the transfer had been made inter vivos

settlors dying before January 1, 1987,

Non-Skip Person

by an individual, it would not have been

any addition made to a revocable trust

subject to gift tax by reason of the

A non-skip person is any person who is

after the death of the settlor will be

medical and educational exclusion, then

not a skip person.

treated as made to an irrevocable trust.

the termination is not a

Generation Assignment

Transition Rule in Case of

generation-skipping transfer, and you

do not have to file this form to report the

A generation is determined along family

Mental Disability

termination.

lines as follows.

If the settlor was under a mental

1. Where the beneficiary is a lineal

Transition Rule for Revocable

disability on October 22, 1986, the GST

descendant of a grandparent of the

tax may not apply. See Regulations

Trusts

transferor (for example, the donor's

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

The GST tax will not apply to any

cousin, niece, nephew, etc.), the

of the term “mental disability” and

termination of an interest in a revocable

number of generations between the

additional details.

trust, provided:

transferor and the descendant is

The trust was executed before

Exceptions to Additions Rule

determined by subtracting the number

October 22, 1986;

Do not treat as an addition to a trust any

of generations between the grandparent

The trust as it existed on October 21,

addition that is made pursuant to an

and the transferor from the number of

1986, was not amended after October

instrument or arrangement that is

generations between the grandparent

21, 1986, in any way that created or

and the descendant.

covered by the transition rules

increased the amount of a

discussed above under Transition Rule

2. Where the beneficiary is the lineal

generation-skipping transfer;

for Revocable Trusts and Transition

descendant of a grandparent of a

Except as provided in Exceptions to

Rule in Case of Mental Disability. This

spouse (or former spouse) of the

Additions Rule, later, no additions were

also applies to inter vivos transfers if the

transferor, the number of generations

made to the trust; and

same property would have been added

between the transferor and the

The settlor died before January 1,

to the trust by such an instrument. For

descendant is determined by

1987.

examples illustrating this rule, see

subtracting the number of generations

Regulations section 26.2601-1(b)(5)(ii).

A revocable trust is any trust that on

between the grandparent and the

October 22, 1986, was not an

spouse (or former spouse) from the

Definitions

irrevocable trust, as defined previously,

number of generations between the

and would not have been an irrevocable

grandparent and the descendant.

Skip Persons

trust had it been created before

3. For this purpose, a relationship

For termination purposes, skip person

September 25, 1985.

by adoption is considered a blood

means a trust beneficiary who is either:

relationship. A relationship by half-blood

The instructions under Trusts

1. A natural person assigned to a

is considered a relationship by whole

containing qualified terminable interest

generation that is two or more

blood.

property, previously, apply also to

generations below the settlor's

revocable trusts covered by these

4. The spouse or former spouse of a

generation, or

transition rules.

transferor or lineal descendant is

2. A trust that meets either of the

considered to belong to the same

Amendments to revocable trusts. An

following conditions:

generation as the transferor or lineal

amendment to a revocable trust in

descendant, as the case may be.

a. All interests in the trust are held

existence on October 21, 1986, will not

by skip persons; or

be considered to result in the creation

A person who is not assigned to a

generation according to the rules above

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

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