Not understanding generation skipping transfer tax
The generation-skipping transfer tax is an additional tax on wealth transfers to recipients two or more generations younger than the donor.
So, if a grandmother wants to leave her $100 million estate to her grandchildren, the estate would pay the 40% federal estate tax on estate values exceeding $5.49 million (so, in this case, roughly $95 million would be taxed) and an additional 40% generation tax.
The most common way to combat this scenario is transfer $5.49 million out of the estate before death (which would be tax-free, due to a lifetime gift exemption) into a dynastic trust for the grandchildren, Ms. Kaufman said.
