What Is a Generation-Skipping Trust?
When you pass away, it is understandable that you want to pass down as much property as you can to your loved ones—hard-earned assets that you worked a lifetime to acquire. For most people, the federal estate tax does not apply to their assets, especially now that the minimum taxable estate has doubled to $11.7 million (as of 2021). Any estate smaller than this will not be taxed. However, if your estate does reach the taxable level, the federal government can take up to 40 percent or more of your estate, which is the average tax for a taxable estate. A tax lawyer Baltimore, MD residents turn to knows there are methods to reduce the tax you have to pay. One practical way to reduce the size of your estate, and therefore bypass estate tax, is to create what is called a generation-skipping trust. can help.
Generation-Skipping Trust May be Better than Yearly and Lifetime Gifting
One out of 700 Americans has an estate large enough to tax. As such it is rare for any estate to have to pay estate tax nowadays. Yearly gifts, per person, can be up to $15,000 without being taxed. A husband and wife can each give $15,000 to as many heirs as they want, each year, without being taxed.
However, as a Baltimore County, MD tax lawyer can explain, if the lifetime gifting amount is reached for either, the gifts begin to fall under the estate tax and gift tax exclusion. One method of reducing the size of one’s estate is to begin making yearly maximum gifts to children and grandchildren, but even this may not be enough to reduce your estate in time, and again the gifts can eventually exceed the lifetime gifting amount if enough people are gifted. A generation-skipping trust can be set up for your grandchildren, skipping the generation of your children and therefore bypassing estate tax as well.
Who Is Eligible?
In addition to applying to grandchildren, you can set up a generation-skipping trust for anyone who is not related to you and is at least 37.5 years younger than you, other than your spouse or ex-spouse. A bonus is that your children can profit from this generation-skipping trust as well, by utilizing the profits made by the assets within the trust.
Reach Out to Our Firm Today
An experienced Baltimore County, MD tax lawyer can help explain the benefits of a generation-skipping trust, as well as help you set it up to minimize or cut out all of the taxes you would have to pay otherwise. Contact Crepeau Mourges today for more information.