What is a generation-skipping transfer tax?
A generation-skipping transfer tax (GST) is a federal tax that is applied when property is transferred to a beneficiary who is more than one generation removed from the donor. In Hawaii, GST is imposed in addition to the estate tax and inheritance tax. For example, if a grandmother wants to leave her property to her grandchild, the transfer would be subject to GST because it is passing over a generation. GST is also imposed when a trust established for a family member who is more than one generation removed from the donor. The tax rate is normally equal to the estate tax rate, which is 35% in Hawaii. In addition, a GST exemption can be applied to a transfer of property that is equal to the amount of the estate tax unified credit. In order to avoid GST, many individuals in Hawaii opt for life insurance policies. Life insurance policies are not subject to GST, so they can be used to provide income security to family members of the insured person and have the potential to make future transfers tax free. It is important for individuals to consider their options and consult with an estate planning attorney before making decisions about how to leave their property to future generations.
Related FAQs
What is the difference between a trust and a corporation?What are the duties of an executor?
What is a private annuity trust?
What is an “income in respect of a decedent”?
What happens if someone dies without a will?
How does a trust work to protect assets for future generations?
Who is entitled to inherit property?
What is the purpose of a living trust?
What are the options for distributing trust assets after the death of a beneficiary?
What is a division of assets upon death?
Related Blog Posts
Understanding the Basics of Inheritance Laws: A Guide to Successfully Navigating State and Federal Statutes - July 31, 2023How to Ensure Your Estate Plan Reflects Your Wishes Through Inheritance Laws - August 7, 2023
Protect Your Rights as a Beneficiary: Understanding Your Legal Rights After Beneficiary Inheritance - August 14, 2023
Comprehending the Duties and Responsibilities of Executors of Estates: How to Properly Administer an Estate and Fulfill Inheritance Law Requirements - August 21, 2023
Maximizing the Benefits of Inheritance Law for Family Heirs of Estates - August 28, 2023