A generation-skipping trust is a type of irrevocable trust. It allows you to transfer property to your grandchildren or other beneficiaries without having to pay the estate tax on your death. The gift is not subject to the estate tax as long as it qualifies as a "skip."
A skip occurs when you make a transfer that bypasses one or more generations (your children and their descendants). If a grandchild receives money from you directly, it would not be a skip. However, if they receive it through an irrevocable trust set up by their parents, it may be eligible for special tax treatment.
You set up the trust with the intention of benefiting your grandchildren, who are two generations removed from you. When you die, your assets go into the trust instead of directly to your children. When your grandchildren reach adulthood, they'll get their share of the money in the trust — even though they're not yet 18 years old.
If you want to maximize the amount of money that goes to your beneficiaries and minimize the amount that goes to taxes, then you may want to consider creating a generational trust.
Here are some common reasons why clients go to law firms for help with their estate planning:
Generational trusts allow beneficiaries to manage their own affairs while protecting their eligibility for government benefits. When properly drafted by a lawyer, these trusts can help ensure that your loved ones can count on their income and assets without losing access to essential medical care or other benefits.
An estate planning attorney in Daytona Beach can help you understand the legal and tax implications of setting up a trust. Here are some tips for navigating probate in Daytona Beach and setting up a generational trust.
It's important to note that not everyone needs this type of trust. A generational trust is designed for people who want to ensure that their children and grandchildren will receive assets after they die. It's not designed for people who want to leave their assets to charity or non-family members.
You don't need a lawyer to set up a generational trust, but you should consult one anyway — especially if there are multiple beneficiaries involved, or if any of your beneficiaries live outside Florida.
You can name as many beneficiaries as you like in your generational trust. However, keep in mind that each beneficiary must receive equal shares of the trust's assets (unless otherwise specified).