What is a generation-skipping trust?

A generation-skipping trust is a type of trust specifically designed for transferring wealth from one generation to another, bypassing the intermediary generations. This trust is especially beneficial in states with estate taxes, such as Pennsylvania, since it allows individuals to pass their wealth onto grandchildren or future generations without having to pay taxes for every generation in between. Generation-skipping trusts can be set up in a few different ways. One way is for the trustee (the individual in charge of overseeing the trust) to control the use of the funds until the trust beneficiary reach a certain age. At that point, the trust beneficiary can assume control of the trust assets. This type of trust allows the trust beneficiary to benefit from the trust assets while also avoiding any tax liabilities that could occur if the trust assets were placed in the trust beneficiary’s name. Another type of generation-skipping trust is a family trust. This type of trust allows for a person to set up a trust for the benefit of their descendants- grandchildren, great grandchildren, etc.- and stipulate specific directions for the use of the trust assets. This type of trust allows the granter to ensure that their wealth is passed down to future generations in a desired way. In Pennsylvania, a generation-skipping trust is an important tool for individuals looking to pass wealth down to their future generations without having to pay an estate tax. With the proper trust documents, the granter can be confident that their assets will continue to provide for their descendants in the future.

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