The federal generation-skipping transfer (“GST”) tax is arguably one of the most complex and nuanced transfer tax regimes in existence. Even when practitioners have accounted for the federal estate and gift tax regime, the GST tax has a separate application and is often disregarded or forgotten. Because of the many ways that the GST tax can apply directly or indirectly to a transfer, it can surface unintentionally or unexpectedly in an existing or new estate plan. Without proper planning, the GST tax can derail intended planning results by unnecessarily depleting family wealth. The current GST tax rate is the same as the federal estate and gift tax; thus, it deserves careful attention and management in the estate planning process. With proper GST planning, families have a greater chance of preserving dynastic wealth for generations.
This paper attempts to combat the GST tax anxiety practitioners may possess by raising awareness of ten common GST planning mistakes. It is the authors’ hope that by avoiding these mistakes, practitioners can improve the holistic advice provided to clients on their wealth, succession, and tax planning goals.