Instructions For Form 706-Gs(D-1) - 2016 (Page 2 of 5) in pdf

The denominator of the revised

See Regulations section

Trusts containing qualified termina-

fraction is the total value of the entire

26.2601-1(b)(2)(vii) for examples

ble interest property. If an irrevocable

trust immediately after the latest

demonstrating the operation of these

trust in existence on September 25,

addition. If the addition results from a

rules.

1985, holds qualified terminable interest

generation-skipping transfer, reduce the

property (QTIP) (as defined in section

Transition Rule in Case of

numerator and denominator by the

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

Mental Disability

amount of any GST tax imposed on the

under section 2056(b)(7) or 2523(f), the

transfer and recovered from the trust.

If the settlor was under a disability on

trust may elect to be treated for

Round off the allocation fraction to five

October 22, 1986, the GST tax may not

purposes of the GST tax as if the QTIP

decimal places (for example, “.00001”).

apply. See Regulations section

election had not been made. Thus,

26.2601-1(b)(3) for a definition of the

transfers from such a trust will not be

Transition Rule for Revocable

term “mental disability” and details on

subject to the GST tax.

Trusts

the application of this rule.

Additions to irrevocable trusts. To

The GST tax will not apply to any

Exceptions to Additions Rule

the extent that a distribution from a trust

distributions from a revocable trust,

is from an addition to an irrevocable

Do not treat as an addition to a trust any

provided:

trust made after September 25, 1985,

addition that is made pursuant to an

1. The trust was executed before

such distribution is subject to the GST

instrument or arrangement that is

October 22, 1986;

tax. Additions include constructive

covered by the rules discussed earlier

2. The trust as it existed on October

additions described in Regulations

under Transition Rule for Revocable

21, 1986, was not amended after

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

Trusts and Transition Rule in Case of

October 21, 1986, in any way that

Mental Disability. This also applies to

For purposes of figuring the inclusion

created or increased the amount of a

inter vivos transfers if the same property

ratio (defined later), use only the value

generation-skipping transfer;

would have been added to the trust by

of the total additions made to the trust

3. Except as provided later, no

such an instrument. For examples

after September 25, 1985.

addition was made to the trust; and

illustrating this rule, see Regulations

Distributions from trusts to which

section 26.2601-1(b)(4)(ii).

4. The settlor died before January 1,

additions have been made. As

1987.

described earlier, when an addition is

Definitions

made after September 25, 1985, to an

A revocable trust is any trust that on

irrevocable trust, only the portion of the

Skip persons. For GST tax purposes,

October 22, 1986, was not an

trust resulting from the addition is

skip person means:

irrevocable trust (as defined earlier) and

subject to the GST tax. For distributions,

would not have been an irrevocable

1. A natural person assigned to a

this portion is the product of the

trust had it been created before

generation that is two or more

allocation fraction and the value of the

September 25, 1985.

generations below the settlor's

property distributed (including

generation, or

The instructions under Trusts

accumulated income and appreciation

2. A trust that meets the following

containing qualified terminable interest

on that property).

conditions:

property apply also to revocable trusts

The allocation fraction is a fraction,

covered by these transition rules.

a. All interests in the trust are held

the numerator of which is the value of

by skip persons, or

the addition as of the date it was made

Amendments to revocable trusts. An

b. No person holds an interest in the

(regardless of whether it was subject to

amendment to a revocable trust in

trust, and at no time after the transfer to

gift or estate tax, but reduced by the

existence on October 21, 1986, will not

the trust may a distribution be made to a

amount of federal or state estate or gift

be considered to result in the creation of

non-skip person.

tax imposed and paid by the trust). The

or an increase in the amount of a

denominator of the fraction is the fair

generation-skipping transfer where:

Non-skip person. A non-skip person is

market value of the entire trust

The amendment is administrative or

any person who is not a skip person.

immediately after the addition, less any

clarifying in nature or

trust amount that is similar to expenses,

It is designed to perfect a marital or

Generation assignment. A generation

indebtedness, or taxes that would be

charitable deduction for an existing

is determined along family lines as

allowable as a deduction under section

transfer, and it only incidentally

follows:

2053, and further reduced by the same

increases the amount transferred to a

1. Where the beneficiary is a lineal

amount that the numerator was reduced

skip person.

descendant of a grandparent of the

by to reflect federal or state estate or gift

Addition to revocable trusts. If an

transferor (for example, the donor's

taxes paid by the trust.

addition (including a constructive

cousin, niece, nephew, etc.), the

When there is more than one

addition) to a revocable trust is made

number of generations between the

addition, the allocation fraction is

after October 21, 1986, and before the

transferor and the descendant is

revised after each addition. The

death of the settlor, all subsequent

determined by subtracting the number

numerator of the revised fraction is the

distributions from the trust will be

of generations between the grandparent

sum of:

subject to the GST tax, provided the

and the transferor from the number of

other requirements of taxability are met.

generations between the grandparent

1. The value of the trust subject to

For settlors dying before January 1,

and the descendant.

the GST tax immediately before the last

1987, any addition made to a revocable

addition and

2. Where the beneficiary is the lineal

trust after the death of the settlor will be

descendant of a grandparent of a

2. The amount of the latest addition.

treated as if made to an irrevocable

spouse (or former spouse) of the

trust.

transferor, the number of generations

-2-

Instructions For Form 706-Gs(D-1) - 2016 Page 2

Related Articles

Related forms

Related Categories