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

A generation skipping trust is a type of estate plan that allows beneficiaries to skip a generation of heirs when passing on assets. This means that the assets won’t pass on to the beneficiary’s children or grandchildren, but rather to a more distant relative such as a great-grandchild. This type of trust is especially useful in Tennessee where there are steep tax liabilities upon death or distribution of assets. The state has implemented several laws to protect the assets of generations in the case of death, and a generation-skipping trust is one way to help make sure the assets are passed on to the proper heirs. Creating a generation skipping trust begins with an individual deciding how and to whom the assets should be distributed. They then draw up a trust deed that sets out the terms and conditions of how the trust will operate. The trust is then funded with the designated assets. Once the trust is established, a trustee is appointed as the legal owner of the trust and is responsible for managing and distributing the trust funds according to the trust deed. The trustee must also ensure that the trust assets are passed on to the proper heirs. In Tennessee, a generation skipping trust can be a great way to ensure that assets are passed on to the right people without taking on any hefty taxes. The trust can also help protect assets from creditors, since assets held in a trust are not subject to creditors’ claims.

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

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