Question

Who among the following would be skip persons for purposes of the GSTT? Phil is the transferor and is 82 years old.

1. John, the grandson of Phil whose mother, Donna, is living but whose father, Fred, is deceased (Fred is Phil’s son).
2. Mary is the great-grandchild of Phil. Both Mary’s parents and grandparents are living.
3. Paige is the 21-year-old wife of Phil’s second son, Mike, age 65.

a) Mary only.

b) John and Mary.

c) Mary and Paige.

d) John, Mary, and Paige.

Answer 1

GSTT stands for "Generation Skipping Transfer Tax". It is a type of federal tax. Flat rate of GSTT is 40%. It is imposed on transfers in the form of gift or inheritance when the beneficiary is any person other than Spouse of transferor. Hence, skip person is any person other than the spouse of the transferor, who is atleast 37 1/2 years younger than the transferor. A non skip person is one who has the right on the property being transferred, which is usually child of the transferor. When the non-skip person dies, the transfer to skip person takes place. Hence, in the given case, John and Mary are skip persons. Because John's father, (the non skip person) Fred, who is the son of Phil, died.