Today, I was reading a trust written in the late 1990’s. In it, the Grantor made a gift to her grandchildren that was to be equal to the Generation Skipping Transfer (GST) tax exemption. This is the amount of money that a person can give to someone, like a grandchild, who is more than 37.5 years younger than the donor, without having to pay a separate tax that is equal to the maximum gift/estate tax, or 40%, on the transfer.
Back then, that GST exemption was a bit more than $1 million. So, my client was making a gift to her three grandchildren of $1 million, divided into equal thirds. So far, so good.
Skip ahead to today. The current GST exemption is $5.34 million! Suddenly a generous gift from grandmother would give everything to the grandchildren, and nothing to my client’s two sons. This is not what my client intended to do.