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

A generation skipping trust is a type of estate planning tool that helps individuals avoid estate taxes when transferring assets from one generation to another. This type of trust is designed to transfer assets, such as property, stocks, bonds, and other forms of wealth, to beneficiaries who are two or more generations removed from the original owner. An estate planning professional in Delaware can create a generation skipping trust that outlines the terms and conditions the beneficiaries must abide by. Typically, these conditions include the age of the beneficiaries, the amount of funds that must be distributed, and the duties of the trustee. Generally, a generation skipping trust is established in the event that the grantor (owner of the trust or assets) dies and the assets are transferred to the beneficiaries. There are also certain tax implications associated with a generation skipping trust. For example, the generation skipping transfer tax is a tax assessed on the transfer of assets to a beneficiary two or more generations removed from the original owner. In Delaware, the generation skipping transfer tax is set at 15 percent. This tax is in addition to other estate taxes, such as inheritance tax. It is important to be aware of this added tax when establishing a generation skipping trust. Overall, a generation skipping trust is a type of estate planning tool that serves to transfer assets from one generation to the next. This type of trust is subject to certain tax implications, so it is important to speak with a knowledgeable estate planning professional to create a plan that meets the needs of all parties involved.

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

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