Instructions For Form 706-Gs(T) - 2016 (Page 2 of 8) in pdf

1985, that hold qualified terminable

The amendment is administrative or

the trust may a distribution be made to a

interest property (QTIP) (as defined in

clarifying in nature, and it only

non-skip person.

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

incidentally increases the amount

Interest

election under section 2056(b)(7) or

transferred to a skip person (defined

A person holds an interest in the trust if,

2523(f), are treated for purposes of the

below), or

at the time the determination is made,

GST tax as if the QTIP election had not

It is designed to perfect a marital or

the person:

been made. Thus, transfers from such a

charitable deduction for an existing

trust will not be subject to the GST tax.

transfer, and it only incidentally

1. Has a current right to receive

increases the amount transferred to a

income or corpus from the trust,

Additions to irrevocable trusts. If an

skip person (defined later).

addition has been made after

2. Is a permissible current recipient

See Regulations section 26.2601-1(b)

September 25, 1985, to an irrevocable

of income or corpus from the trust (other

(2)(vii) for examples demonstrating

trust, the termination of any interest in

than charitable entities), or

these rules.

the trust may be subject in part to the

3. Is a charitable or other entity

GST tax. Additions include constructive

Additions to revocable trusts. If an

described in section 2055(a) and the

additions described in Regulations

addition (including a constructive

trust is a charitable remainder annuity

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

addition) to a revocable trust is made

trust, a charitable remainder unitrust, or

after October 21, 1986, and before the

a pooled income fund.

Medical and educational exclusion.

death of the settlor, all subsequent

If all of the property to which the

Any interest that is created primarily

terminations of interests in the trust will

termination applied has been distributed

to postpone or avoid the GST tax is

be subject to the GST tax if the other

and used for medical or educational

disregarded.

requirements of taxability are met. For

expenses of the transferee such that if

settlors dying before January 1, 1987,

Non-Skip Person

the transfer had been made inter vivos

any addition made to a revocable trust

by an individual, it would not have been

A non-skip person is any person who is

after the death of the settlor will be

subject to gift tax by reason of the

not a skip person.

treated as made to an irrevocable trust.

medical and educational exclusion, then

Generation Assignment

Transition Rule in Case of

the termination is not a

generation-skipping transfer, and you

A generation is determined along family

Mental Disability

do not have to file this form to report the

lines as follows:

If the settlor was under a mental

termination.

1. Where the beneficiary is a lineal

disability on October 22, 1986, the GST

descendant of a grandparent of the

Transition Rule for Revocable

tax may not apply. See Regulations

transferor (for example, the donor's

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

Trusts

cousin, niece, nephew, etc.), the

of the term “mental disability” and

The GST tax will not apply to any

number of generations between the

additional details.

termination of an interest in a revocable

transferor and the descendant is

trust, provided:

Exceptions to Additions Rule

determined by subtracting the number

The trust was executed before

Do not treat as an addition to a trust any

of generations between the grandparent

October 22, 1986;

addition that is made pursuant to an

and the transferor from the number of

The trust as it existed on October 21,

instrument or arrangement that is

generations between the grandparent

1986, was not amended after October

covered by the transition rules

and the descendant.

21, 1986, in any way that created or

discussed above under Transition Rule

2. Where the beneficiary is the lineal

increased the amount of a

for Revocable Trusts and Transition

descendant of a grandparent of a

generation-skipping transfer;

Rule in Case of Mental Disability. This

spouse (or former spouse) of the

Except as provided in Exceptions to

also applies to inter vivos transfers if the

transferor, the number of generations

Additions Rule later, no additions were

same property would have been added

between the transferor and the

made to the trust; and

to the trust by such an instrument. For

descendant is determined by

The settlor died before January 1,

examples illustrating this rule, see

subtracting the number of generations

1987.

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

between the grandparent and the

spouse (or former spouse) from the

A revocable trust is any trust that on

Definitions

number of generations between the

October 22, 1986, was not an

grandparent and the descendant.

irrevocable trust, as defined previously,

Skip Persons

and would not have been an irrevocable

3. For this purpose, a relationship

For termination purposes, skip person

trust had it been created before

by adoption is considered a blood

means a trust beneficiary who is either:

September 25, 1985.

relationship. A relationship by half-blood

1. A natural person assigned to a

is considered a relationship by whole

The instructions under Trusts

generation that is two or more

blood.

containing qualified terminable interest

generations below the settlor's

4. The spouse or former spouse of a

property, previously, apply also to

generation, or

transferor or lineal descendant is

revocable trusts covered by these

2. A trust that meets either of the

considered to belong to the same

transition rules.

following conditions:

generation as the transferor or lineal

Amendments to revocable trusts. An

descendant, as the case may be.

a. All interests in the trust are held

amendment to a revocable trust in

by skip persons, or

A person who is not assigned to a

existence on October 21, 1986, will not

b. No person holds an interest in the

generation according to the rules above

be considered to result in the creation

trust, and at no time after the transfer to

is assigned to a generation based on his

of, or an increase in the amount of, a

or her birth date as follows:

generation-skipping transfer where:

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Instructions For Form 706-Gs(T) - 2016 Page 2

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