Question

Under what circumstances will the predeceased parent rule apply to a transfer to a skip person?

Answer 1

The predeceased parent rule is applied to skip person, because if only one generation is moved up, there is no GST tax liability for such transfers. The predeceased parent rule is allowed to skip person only in these circumstances:

1. Both the deceased parent & child must be lineal descendants of the donor or his wife or his ex-wife.

NOTE : If the donor has no lineal descendants, the deceased parent and child must be lineal descendants of the donor's grandparents. In which case the gift will be free from GST tax.

2.The deceased parent must be dead at the time of the gift, even if the child only receives the gift later as a taxable termination or distribution from a trust.