What is a generation-skipping trust?

A generation-skipping trust is a type of trust used in estate planning in California for people who wish to pass their money down to grandchildren, great-grandchildren, or other descendants farther down the family line. This type of trust helps the person avoid the federal generation-skipping transfer tax, which was created to prevent people from avoiding taxes by transferring large amounts of wealth directly to grandchildren or other descendants. In California, a generation-skipping trust typically provides that any money or assets transferred to it will be held in trust for the benefit of the person’s descendants in future generations. This type of trust is also known as a “dynasty trust” because it can provide financial security for multiple generations of the same family. A generation-skipping trust can be established during the person’s lifetime or in a will or other estate planning documents. In California, it may also be subject to the state’s community property law, meaning the assets included in the trust will be owned equally by both spouses. The trust must be established and managed according to California law and the trust agreement must carefully list the names and ages of each beneficiary of the trust. There are certain tax rules associated with these trusts, including the federal generation-skipping transfer tax, so it’s important to consult an experienced California trust and estates attorney to make sure all legal requirements are met.

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What is a generation-skipping trust?

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