Generation-Skipping Trust
A type of legally binding trust agreement in which the contributed assets are passed down to the grantor's grandchildren, not the grantor's children. The generation to which the grantor's children belong skips the opportunity to receive the assets in order to avoid the estate taxes that would apply if the assets were transferred to them. Investopedia Says:
Because a generation-skipping trust effectively transfers assets from the grantor's estate to his or her grandchildren, the children of the grantor never take title to the assets. This is what allows the grantor to avoid the estate taxes that would apply if the assets were transferred to his or her children first.
Generation-skipping trusts can still be used to provide some financial benefits to a grantor's children, however, because any income generated by the trust's assets can be made accessible to the grantor's children while still leaving the assets in trust for his or her grandchildren. Related Terms:
Blind Trust
Credit Shelter Trust - CST
Estate Tax
Irrevocable Trust
Revocable Trust
Trust
Trust Company
Trust Deed
Trustee |