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If a gift is made to a trust, a natural

c. Similar rules apply for a new

who is also a descendant of the parent of

person will have an interest in the

generation every 25 years.

the transferor.

property transferred to the trust if that

The same rules apply to the

If more than one of the rules for

person either has a present right to

generation assignment of any descendant

assigning generations applies to a donee,

receive income or corpus from the trust

of the individual.

that donee is generally assigned to the

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

This rule does not apply to a transfer

youngest of the generations that would

permissible current recipient of income or

to an individual who is not a lineal

apply.

corpus from the trust (for example,

descendant of the transferor if the

possesses a general power of

If an estate, trust, partnership,

transferor at the time of the transfer has

appointment).

corporation, or other entity (other than

any living lineal descendants.

governmental entities and certain

Skip person. A donee, who is a natural

If any transfer of property to a trust

charitable organizations and trusts,

person, is a skip person if that donee is

would have been a direct skip except for

described in sections 511(a)(2) and

assigned to a generation that is two or

this generation assignment rule, then the

511(b)(2), as discussed below) is a

more generations below the generation

rule also applies to transfers from the

donee, then each person who indirectly

assignment of the donor. See

trust attributable to such property.

receives the gift through the entity is

Determining the Generation of a Donee,

Ninety-day rule. For assigning

treated as a donee and is assigned to a

below.

generation as explained in the above

individuals to generations for purposes of

A donee that is a trust is a skip person

rules.

the GST tax, any individual who dies no

if all the interests in the property

later than 90 days after a transfer

Charitable organizations and trusts,

transferred to the trust (as defined above)

occurring by reason of the death of the

described in sections 511(a)(2) and

are held by skip persons.

transferor is treated as having

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

predeceased the transferor. The 90-day

A trust will also be a skip person if

assigned to the donor’s generation.

rule applies to transfers occurring on or

there are no interests in the property

Transfers to such organizations are

after July 18, 2005. See Regulations

transferred to the trust held by any

therefore not subject to the GST tax.

section 26.2651-1 for more information.

person, and future distributions or

These gifts should always be listed in

terminations from the trust can be made

Part 1 of Schedule A.

Examples

only to skip persons.

Charitable Remainder Trusts

The GST rules can be illustrated by the

Nonskip person. A nonskip person is

following examples.

Gifts in the form of charitable remainder

any donee who is not a skip person.

Example 1. You give your house to

annuity trusts, charitable remainder

Determining the Generation of a

your daughter for her life with the

unitrusts, and pooled income funds are

remainder then passing to her children.

Donee

not transfers to skip persons and

This gift is made to a “trust” even though

therefore are not direct skips. You should

Generally, a generation is determined

there is no explicit trust instrument. The

always list these gifts in Part 1 of

along family lines as follows:

interest in the property transferred (the

Schedule A even if all of the life

1. If the donee is a lineal descendant

present right to use the house) is

beneficiaries are skip persons.

of a grandparent of the donor (for

transferred to a nonskip person (your

Generation Assignment Where

example, the donor’s cousin, niece,

daughter). Therefore, the trust is not a

Intervening Parent Is Deceased

nephew, etc.), the number of generations

skip person because there is an interest

between the donor and the descendant

in the transferred property that is held by

If you made a gift to your grandchild and

(donee) is determined by subtracting the

a nonskip person, and the gift is not a

at the time you made the gift, the

number of generations between the

direct skip. The transfer is an indirect

grandchild’s parent (who is your or your

grandparent and the donor from the

skip, however, because on the death of

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

number of generations between the

the daughter, a termination of her interest

deceased, then for purposes of

grandparent and the descendant (donee).

in the trust will occur that may be subject

generation assignment, your grandchild is

2. If the donee is a lineal descendant

to the GST tax. See the instructions for

considered to be your child rather than

of a grandparent of a spouse (or former

Part 3 — Indirect Skips for a discussion of

your grandchild. Your grandchild’s

spouse) of the donor, the number of

how to allocate GST exemption to such a

children will be treated as your

generations between the donor and the

trust.

grandchildren rather than your

descendant (donee) is determined by

great-grandchildren.

Example 2. You give $100,000 to

subtracting the number of generations

your grandchild. This gift is a direct skip

This rule is also applied to your lineal

between the grandparent and the spouse

that is not made in trust. You should list it

descendants below the level of

(or former spouse) from the number of

in Part 2 of Schedule A.

grandchild. For example, if your

generations between the grandparent and

grandchild is deceased, your

Example 3. You establish a trust that

the descendant (donee).

great-grandchildren who are lineal

is required to accumulate income for 10

3. A person who at any time was

descendants of the deceased grandchild

years and then pay its income to your

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

are considered your grandchildren for

grandchildren for their lives and upon

above is assigned to the generation of

purposes of the GST tax.

their deaths distribute the corpus to their

that person. A person who at any time

children. Because the trust has no current

was married to the donor is assigned to

This special rule may also apply in

beneficiaries, there are no present

the donor’s generation.

other cases of the death of a parent of the

interests in the property transferred to the

4. A relationship by adoption or

transferee. If property is transferred to an

trust. All of the persons to whom the trust

half-blood is treated as a relationship by

individual who is a descendant of a parent

can make future distributions (including

whole-blood.

of the transferor and that individual’s

distributions upon the termination of

5. A person who is not assigned to a

parent (who is a lineal descendant of the

interests in property held in trust) are skip

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

parent of the transferor) is deceased at

persons (that is, your grandchildren and

above is assigned to a generation based

the time the transfer is subject to gift or

great-grandchildren). Therefore, the trust

on his or her birth date as follows:

estate tax, then for purposes of

itself is a skip person and you should list

a. A person who was born not more

generation assignment, the individual is

the gift in Part 2 of Schedule A.

than 12

years after the donor is in the

treated as if he or she is a member of the

Example 4. You establish a trust that

donor’s generation.

generation that is one generation below

b. A person born more than 12

the lower of:

pays all of its income to your

•

years, but not more than 37

years, after

The transferor’s generation or

grandchildren for 10 years. At the end of

•

the donor is in the first generation

The generation assignment of the

10 years, the corpus is to be distributed to

younger than the donor.

youngest living ancestor of the individual

your children. Since for this purpose

-7-

Instructions For Form 709 - United States Gift (And Generation-Skipping Transfer) Tax Return - 2010 Page 7

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