GENERATION SKIPPING TRANSER TAXES隔代财产转移税.docVIP

ESTATE PLANNING GENERATION SKIPPING TRANSFERS In General: The Generation Skipping Transfer Tax is the consummation of a projected begun years ago by a government desirous of stopping the vast transfer of wealth from generation to generation that was beyond the reach of the transfer tax system. That “system” was traditionally comprised of the Federal Estate Tax and the Federal Gift Tax. Because of the way those codes were devised, transfers in which intervening generations had only “limited” interests, those interests escaped the reach of these excise taxes. For instance, §2033 of the Estate Tax Code reached only interests held by a decedent to the extent of those interests. If a father created a trust and in that trust gave his children an income interest for their lives with the remainder continuing for the next generation, and so forth, those intervening generations had no “interest” in the previously created trust because that interest (only a right to income for life) expired on the death of the individual beneficiary if favor of the next generation. The first real attempt to close this loophole came with the Tax Reform Act of 1976. The Generation Skipping Transfer Tax envisioned in that law was quite cumbersome (more so than the present law) and attempted to assess a tax which would be equal in amount to the estate tax avoided by the use of carefully drafted trusts. Unfortunately, the tax was so complicated that no generation skipping tax returns were ever filed because no one knew how to compute the tax. In 1986, with the total revamp of the Internal Revenue Code, the present Chapter 13 was introduced into the Code in essentially the format we employ today. It is that version of the Generation Skipping Transfer Tax that we will explore in this course. Terminology: As with most legal subjects, the Generation Skipping Transfer Tax has its own set of unique terms. What follows are the most important concepts for understanding the operation of this