What is a generation-skipping transfer tax?
A generation-skipping transfer tax is a tax imposed by the federal government and certain states, including Oregon, on the transfer of property from one person to another person who is more than one generation below the transferor. For example, if a grandparent leaves property to a grandchild, that transfer would be subject to the generation-skipping transfer tax. The tax is intended to prevent people from avoiding federal estate taxes by transferring property to a grandchild or more distant relatives rather than passing it on to their children. In Oregon, the generation-skipping transfer tax is generally calculated as a percentage of the total amount of the transfer. The rate depends on the size of the transfer and ranges from 55% to 40%. The rate is lower for transfers up to the exemption amount, which is $2,500,000.00 for individuals and $5,000,000.00 for couples. Any amount above this is taxed at the maximum rate. It is important to note that this tax only applies to transfers made on or after January 1, 2016. For transfers made prior to this date, the exemption amount is significantly lower. Furthermore, the generation-skipping transfer tax does not apply to lifetime gifts to a grandchild or more distant heir, as long as the gift does not exceed the annual exemption amount.
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