What Is a GST Trust?

A generation skipping trust may be established to avoid some estate taxes.

A generation-skipping trust (GST) is a legally binding arrangement that bequeaths a grantor's assets to grandchildren rather than his or her children, according to Investopedia. It allows the grantor to forgo the estate taxes owed had the children inherited them.

Reasons

A grantor may be estranged from his or her children but wants to make sure the grandchildren are financially secure. He may have enough money to spread it around to several family members, or maybe the children have large estates of their own.

Benefits

Investopedia says the children cannot take ownership of the assets, they can still have access to any income generated by the trust's assets while they are held in trust for the grantor's grandchildren.

Limit of Trust

Sometimes called a dynasty trust, a GST is designed to avoid taxes upon the grantor's chidren's deaths and beyond. There is a $2 million limit each grantor can leave in a GST.

References

• Investopedia: Generation-Skipping Trust

Resources

• PGDC: What is a GST and why do I care?