What is a generation-skipping trust?

A generation-skipping trust (GST) is a type of trust that is used to transfer assets to a beneficiary two or more generations down the family line. This type of trust is most often used to pass on assets to grandchildren or great-grandchildren without the need for the asset to pass through the intermediate generations or be taxed. In Michigan, a GST is created when the trust creator (also known as the grantor or settlor) transfers assets to a trust for the benefit of a designated beneficiary or class of beneficiaries who are two or more generations below the grantor. A GST is especially advantageous because it allows for assets to be transferred free of estate and gift taxes. In Michigan, any gifts over $15,000 are subject to gift taxes, so a GST can be used to effectively transfer large amounts of assets without being taxed. Additionally, a GST can be used to protect assets from creditors or for purposes of tax mitigation. However, GSTs are subject to certain rules and regulations. For instance, if a GST is established in Michigan, the trust must be irrevocable and may not be amended or modified unless it is specifically allowed by law. Additionally, the Grantor must follow a certain procedure for transferring assets, as failure to do so may result in those assets being included in the Grantor’s estate. Overall, a generation-skipping trust is a powerful tool for transferring assets without incurring taxes, but it should only be used with guidance and counsel from an experienced estate planning attorney.

Related FAQs

What is a revocable living trust?
What is a trust deed?
What is a generation-skipping trust?
How do I choose a trustee for my trust?
What is a grantor?
What are the advantages of a revocable trust?
What is an asset protection trust?
How do I set up a trust?
What is an executor?
What is a power of attorney?

What is a generation-skipping trust?

Related FAQs

Related Blog Posts