Generation-Skipping Transfer (GST) Tax Clause

What is it?

The GST tax is a federal tax on transfers to grandchildren or other "skip persons" that skip a generation. A GST allocation clause allows the trustee to allocate the grantor's GST exemption to minimize or eliminate this tax.

Why is it important?

The GST tax rate is currently 40% on top of any estate tax. Proper allocation of the GST exemption (currently over $12 million per person) can save substantial taxes when wealth passes to grandchildren or dynasty trusts.

Example Language

The Trustee is authorized to allocate the Grantor's available GST exemption to any transfers in a manner that minimizes generation-skipping transfer taxes, including making late allocations or opt-out elections as permitted by law.