Are you looking for a way to protect your assets and pass them down to your grandchildren without incurring heavy taxes? A generation skipping trust may be the solution you are looking for. At Heritage Law Office, our experienced attorneys can help you set up a generation skipping trust that will help you achieve your estate planning goals.
What is a Generation Skipping Trust?
A generation skipping trust, also known as a dynasty trust, is a type of trust that is designed to transfer assets from one generation to another without incurring generation-skipping transfer taxes (GSTT). GSTT is a tax on transfers made to someone who is two or more generations younger than the person making the transfer. The tax rate for GSTT is generally higher than other estate and gift taxes, making a generation skipping trust an attractive option for those looking to transfer assets to their grandchildren or even great-grandchildren.
Understanding How a Generation Skipping Trust Works
A generation skipping trust is a complex legal tool that requires careful planning and execution. The trust is set up to hold assets for the benefit of future generations. The trustee manages the trust assets and distributes them according to the instructions set forth in the trust agreement.
The trust can be structured in a variety of ways, including as an irrevocable trust or a testamentary trust. An irrevocable trust is set up during the grantor's lifetime, and the grantor relinquishes control over the trust assets. A testamentary trust is set up after the grantor's death, and the trust assets are distributed according to the terms of the grantor's will.
One of the main benefits of a generation skipping trust is that it can provide a source of income for future generations while minimizing the tax consequences. The trust assets can be invested, and the income generated can be distributed to the beneficiaries without incurring GSTT.
How a Generation Skipping Trust Can Benefit You
There are several benefits to setting up a generation skipping trust:
Tax Benefits
The primary benefit of a generation skipping trust is the tax savings it provides. By transferring assets to a trust that is designed to skip a generation, you can avoid or minimize the GSTT. In addition, the trust assets can grow tax-free, which can provide significant tax savings over time.
Asset Protection
A generation skipping trust can also provide asset protection for future generations. Because the trust assets are held in a separate legal entity, they are protected from creditors and lawsuits. This can help ensure that the trust assets are preserved for future generations.
Control over Distribution
A generation skipping trust also provides the grantor with control over how the trust assets are distributed. The grantor can set forth specific instructions in the trust agreement regarding when and how the assets should be distributed. This can help ensure that the assets are used for the intended purpose.
Continued Family Legacy
Finally, a generation skipping trust can help preserve a family's legacy. By passing assets down to future generations, you can ensure that your family's values and traditions are carried on for years to come.
Frequently Asked Questions (FAQs)
1. What is a Generation Skipping Trust and How Does it Work?
A Generation Skipping Trust (GST) is a type of legal agreement that allows for the transfer of assets to a generation that is two or more tiers below the trust settlor, typically grandchildren. The trust's name derives from its purpose: to "skip" the settlor's children's generation. The trust is designed to reduce estate taxes that would typically be charged when wealth is transferred from one generation to the next.
2. What Are the Tax Implications and Benefits of a Generation Skipping Trust?
A major benefit of a GST is the potential reduction or even elimination of estate taxes. The trust can protect assets from estate tax for as long as the trust is in effect, often for multiple generations. However, there is a Generation Skipping Transfer (GST) tax that applies to these transfers. The state of Wisconsin does not have a generation skipping transfer tax. Federally, the generation skipping transfer tax is at a flat rate of 40% on transfers above the lifetime GST tax exemption amount, which is $12.92 million per individual in 2023.
3. How to Set Up a Generation Skipping Trust?
Setting up a Generation Skipping Trust generally involves hiring an estate planning attorney who specializes in trusts. The process involves deciding on the terms of the trust, such as who the beneficiaries will be, the trustee, and what happens to the assets within the trust. The trust is then created through a legal document and the assets are transferred into the trust.
4. What is the Generation Skipping Transfer Tax and How Can It Be Minimized?
The Generation Skipping Transfer Tax is a federal tax on assets passed on from a grandparent to a grandchild (or great-grandchild) through a Generation Skipping Trust. It is levied in addition to any applicable estate or gift tax. To minimize this tax, strategies like allocation of the GST tax exemption, late allocation of GST exemption, and severing trusts can be used. An experienced estate planning attorney can help determine the best strategy.
5. Who Should Consider a Generation Skipping Trust in their Estate Planning?
A Generation Skipping Trust may be a good option for individuals who have a substantial amount of wealth and wish to leave assets to their grandchildren or later generations. It is also beneficial for those wanting to shield assets from estate taxes over the long term. Consulting with an estate planning attorney can help determine if a GST is a suitable strategy based on individual circumstances.
Contact a Generation Skipping Trust Attorney in Wisconsin
If you are interested in setting up a generation skipping trust, contact Heritage Law Office today. Our experienced attorneys can help you navigate the complex legal requirements and ensure that your estate planning goals are met.
At Heritage Law Office, our estate planning attorneys will thoroughly review your needs and wants when planning your estate and provide an outline of your best options, including the creation of a generation skipping trust. Contact us either online or at 414-253-8500 to schedule a free consultation today.
Cities Where Services are Offered
We offer services to clients throughout the state of Wisconsin, including in the following cities:
- Milwaukee
- Madison
- Green Bay
- Kenosha
- Racine
- Appleton
- Waukesha
- Oshkosh
- Eau Claire
- Janesville
- Mequon
- Elm Grove
- Fox Point
- Bayside
- Shorewood
- Whitefish Bay
- Fitchburg
- Brookfield
- Waunakee
- Cedarburg
- and more.
We also offer remote, phone, and online appointments, so you can receive our services wherever you are located in Wisconsin.
Don't wait any longer to start protecting your assets and ensuring your family's legacy. Contact us today to schedule a consultation with a generation skipping trust attorney in Wisconsin. At Heritage Law Office, we are committed to providing the best possible legal services to our clients, and we look forward to helping you achieve your estate planning goals.
