Generation-skipping trusts are trusts that used to be created in order to make large gifts or bequests to younger generations without incurring estate and gift taxes that otherwise would apply. After the generation-skipping transfer tax was enacted, the generation-skipping trusts largely lost their tax benefits because these transfers now are subject to the same taxes they would be without the trusts. Dynasty trusts remain a way that well-off individuals making transfers above the applicable exclusion amount can avoid the generation-skipping tax.
[Last updated in January of 2022 by the Wex Definitions Team]
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