A Generation Skipping Trust (GST), also known as a dynasty trust, allows the grantor to transfer a significant amount of assets to beneficiaries, in skipping a generation, are typically their grandchildren who receive the benefit of the “gift” as tax-free. In acquiring a dynasty trust, it is mainly to aid in the future generations besides one’s direct descendents. As this type of trust “does not have a defined termination date or event”, it has the ability to pass down through many generations. Also keep in mind that this type of trust is only “allowable in those states that have eliminated the rule against perpetuities” (Spaulding 1). A main advantage of this generation skipping trust is that the estate taxes is only paid by the grantor upon
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The income from the trust is reported directly to the grantor’s tax return; therefore maximizing the amount of assets the beneficiary ultimately receives. Assets are removed from the grantor’s gross estate (similar to an irrevocable trust), but the asset is still included in the grantor’s estate upon death for tax purposes; therefore, not saving any estate taxes. The main purpose of this type of trust is primarily for the “IDGT to grow without being reduced by income taxes” (CBiz 1). The grantor in the situation of IDGT pays the tax on any income created from the trust, although the tax payment is paid on income not generated by the grantor, this would not fall under the category of a gift. The overall advantage of this creates a “double benefit” because the grantor pays the tax using his own money which removes an asset “from his estate” (Cbiz 2) and also from a liability that decreases from the …show more content…
With enough research and the aid of professionals who specialize in trust planning, one is able to find a trust that best fits individual and benefactor’s needs. The main points to remember between all of the listed types of trusts are the way the trusts are taxed, who the trusts are taxed to, when they are taxed and in whether they are able to be revised. Although these are not the only conditions to consider, it is a good starting point in order to have an effective and efficient plan to preserves assets and create a
The income from the trust is reported directly to the grantor’s tax return; therefore maximizing the amount of assets the beneficiary ultimately receives. Assets are removed from the grantor’s gross estate (similar to an irrevocable trust), but the asset is still included in the grantor’s estate upon death for tax purposes; therefore, not saving any estate taxes. The main purpose of this type of trust is primarily for the “IDGT to grow without being reduced by income taxes” (CBiz 1). The grantor in the situation of IDGT pays the tax on any income created from the trust, although the tax payment is paid on income not generated by the grantor, this would not fall under the category of a gift. The overall advantage of this creates a “double benefit” because the grantor pays the tax using his own money which removes an asset “from his estate” (Cbiz 2) and also from a liability that decreases from the …show more content…
With enough research and the aid of professionals who specialize in trust planning, one is able to find a trust that best fits individual and benefactor’s needs. The main points to remember between all of the listed types of trusts are the way the trusts are taxed, who the trusts are taxed to, when they are taxed and in whether they are able to be revised. Although these are not the only conditions to consider, it is a good starting point in order to have an effective and efficient plan to preserves assets and create a