What Is a Generation-Skipping Trust in Tampa?
Florida residents have access to a wide range of trusts, and one option is a generation-skipping trust. Also known simply as a “GST,” this type of trust could be attractive to various families who want to protect their assets, provide for the next generation, and avoid probate. How does a generation-skipping trust work? Could this be the right choice for your family? These are questions you might want to ask a Tampa estate planning attorney.
Generation-Skipping Trusts Pass Assets Directly to Grandchildren
A GST skips a generation, passing assets to grandchildren instead of children. For example, you might have two adult children in their 30s. Both of your adult children might each have two children (your grandchildren). A GST would leave assets to your four grandchildren and not your adult children.
Why Would Someone Choose a Generation-Skipping Trust?
When you choose a generation-skipping trust, you prevent multiple “rounds” of estate taxes. If you were to leave these assets to your children first, they may pay estate taxes on this “first round” of estate taxes. Your grandchildren would then pay additional estate taxes when they inherit the assets from your children.
With multiple rounds of inheritance and estate taxes, your family fortune could be “whittled down” through the generations by continuous estate taxes. As a result, a generation-skipping trust can help preserve the family’s wealth, especially if subsequent generations are not as financially successful as you were.
Generation-Skipping Trusts Are Only for Wealthy Families
Generally speaking, generation-skipping trusts are only appropriate for wealthy families. This is because only wealthy families will need to pay significant estate taxes in Florida. The current exemption rates are quite high, and even multimillionaires may not have to worry about estate taxes. Those with assets over about $14 million may need to consider strategies like GSTs.
That being said, GSTs also offer additional benefits beyond tax planning. Concerned parents might also choose GSTs if they are worried about their adult children getting divorced. In certain situations, divorces can threaten inherited wealth. As a result, leaving assets to younger, unmarried grandchildren could provide a greater sense of confidence for grantors.
What About the Skipped Generation?
What happens to the “skipped generation” in this scenario? While grandchildren are the only beneficiaries in these trusts, a GST can still include provisions that allow children to benefit financially. For example, the trust might allow adult children to access any income generated by the trust assets, while reserving the assets themselves for the grandchildren. Speak with an estate planning attorney in Tampa to learn more about these benefits.
Contact a New Port Richey Estate Planning Lawyer for Further Guidance
If you’d like to learn more about generation-skipping trusts and other estate planning strategies, consider contacting a Seminole estate planning lawyer. While generation-skipping trusts may not be appropriate for all families, they could provide considerable benefits in certain situations. Continue this discussion by contacting Knudsen Law today.
Sources:
investopedia.com/terms/g/generation-skippingtrust.asp
irs.gov/forms-pubs/about-form-706
