What is a generation skipping trust and how does it work?

A generation skipping trust is a special type of trust that is designed to help individuals provide for their descendants while minimizing taxes. This type of trust allows property to be passed on to the grandchildren, great-grandchildren, or other more distant descendants without first passing through the hands of their children. It works similar to a regular trust in that the property is held in trust, but the trust’s assets are not subject to taxation until they are distributed. To set up a generation skipping trust, the individual must identify someone they would like to act as the trustee, who is responsible for managing the trust’s assets. The trust must also designate a beneficiary, which is typically a grandchild or other descendant of the individual. The trust is then funded with assets from the individual or their estate. The trust may include instructions on how the assets are to be distributed, when the beneficiary will receive them, and other conditions for the trust. The trustee must then follow these instructions when managing the trust’s assets. The trust also must comply with all relevant federal and state estate planning laws, such as those in California. Generation skipping trusts can be an important part of estate planning, as they can help individuals provide for their descendants in a tax-efficient manner. It is important to consult with a qualified attorney when setting up this type of trust in California to ensure it is done properly and in compliance with the applicable laws.

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What is a generation skipping trust and how does it work?

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