Is there a way to avoid the generation skipping tax?
With good planning, assets may be partially transferred to succeeding generations without triggering the GST. Although it sought to prevent most generation skipping transfers from occurring, Congress decided to give individuals the right to transfer to future generations a limited amount of property free of the GST. In addition to the estate tax exclusion amount, every individual has an equal generation skipping tax exemption.
It is important to realize that the generation skipping tax is imposed in addition to the estate tax. If a grandparent attempts to transfer more than the GST exempt amount collectively to the grandchildren, first estate taxes and then GST taxes will be imposed on the transfer. When the two taxes are combined, most of the estate can be consumed by taxes.
The GST exemption available to you provides a wonderful planning opportunity when used in combination with other estate tax planning techniques. That opportunity is called a Dynasty Trust.