Generation-Skipping Trust


DEFINITION of 'Generation-Skipping Trust'

A type of legally binding trust agreement in which the contributed assets are passed down to the grantor's grandchildren, not the grantor's children. The generation to which the grantor's children belong skips the opportunity to receive the assets in order to avoid the estate taxes that would apply if the assets were transferred to them.

BREAKING DOWN 'Generation-Skipping Trust'

Because a generation-skipping trust effectively transfers assets from the grantor's estate to his or her grandchildren, the children of the grantor never take title to the assets. This is what allows the grantor to avoid the estate taxes that would apply if the assets were transferred to his or her children first.

Generation-skipping trusts can still be used to provide some financial benefits to a grantor's children, however, because any income generated by the trust's assets can be made accessible to the grantor's children while still leaving the assets in trust for his or her grandchildren.

  1. Form 706-GS(D): Generation-Skipping ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  2. Trust

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  3. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  4. Trustee

    A person or firm that holds or administers property or assets ...
  5. Irrevocable Trust

    A trust that can't be modified or terminated without the permission ...
  6. Blind Trust

    A trust in which the executors have full discretion over the ...
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