What is a Generation-skipping transfer tax?
A generation-skipping transfer tax is a federal tax imposed on property transfers to beneficiaries who are two or more generations younger than the donor, such as grandchildren or great-grandchildren. The GST tax prevents wealthy families from avoiding estate taxes by skipping generations in their wealth transfer planning. The tax rate matches the highest estate tax rate of 40% and applies to direct skips, taxable distributions, and taxable terminations. Under the One Big Beautiful Bill Act, the GST exemption increases to $15 million per person starting in 2026. Strategic coordination with Child traditional IRA funding creates multi-generational wealth transfer opportunities.
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