GST Tax Essentials: Rates, Exemptions, and Filing for 2024–2025

Executors and trustees across the United States are sizing up the generation‑skipping transfer rules as filing season nears, with the Internal Revenue Service keeping the 2024 benchmark in place for now. The GST tax remains a separate federal levy that applies when wealth moves to a grandchild or another person who is two or more generations below the giver, either during life or at death.

The current system centers on a flat 40% GST tax rate and a lifetime GST exclusion of $13,610,000 per person (2024 figure, still the most current as of October 2025). Unlike the main estate and gift exclusions, the GST exclusion is generally applied automatically unless the person making the transfer elects out. For most families, the high exclusion means no GST liability at all. But for larger estates and long‑term trusts, the GST framework still matters—and mistakes can be costly because the GST tax is in addition to any gift or estate tax.

Who is affected and when

The core questions families and advisers face are: who pays, when they pay, and what counts as a generation‑skipping transfer.

• Skip person: a beneficiary two or more generations below the transferor (for example, a grandchild).
  • For unrelated recipients, a skip person is anyone more than 37.5 years younger than the transferor.
• Direct skip: a transfer of property directly to a skip person that is subject to gift or estate tax. This can be:
  • a lifetime gift, or
  • a transfer at death through a will or trust.
• Trust-triggered events:
  • Taxable termination: when a trust interest for a non‑skip person ends (often due to death) and only skip persons remain.
  • Taxable distribution: when a trust makes a distribution to a skip person that is not a direct skip and not tied to the end of a non‑skip person’s interest.

The trigger is not value alone but the combination of a taxable transfer and the generational gap.

The law also contains relief: under the deceased parent rule, if the grandchild’s parent (the transferor’s child) has already died at the time of the transfer, the grandchild is not treated as a skip person. That avoids layering a penalty on families when a generation is missing.

Filing, forms, and who files

Timing and roles follow established rules:

• A direct skip at death is reported on the decedent’s federal estate tax return, Form 706.
  • Executors file within 9 months of death unless they request an extension.
  • Form 706 must be mailed; electronic filing is not available.
• For trust-related GST events, trustees report and pay GST tax using Form 706-GS(T).
• Who pays varies by event:
  • Estate pays for direct skips at death (reported on Form 706).
  • Trustee pays for taxable terminations (and files Form 706-GS(T)).
  • Skip person beneficiary pays for taxable distributions (though trustees still report and may have reimbursement provisions).

The responsible filer pays the tax with the return. Executors and trustees must keep careful records and follow the rules because the statutory roles and deadlines are strict.

Planning consequences and exclusion allocation

According to analysis by VisaVerge.com, the GST framework drives careful planning for multi‑generation trusts because of how exclusion allocations operate over time.

• Once a person allocates GST exclusion to a trust, future growth in that trust can be sheltered from the GST tax.
• That encourages families to build GST‑exempt trusts and ensure the allocation is made correctly and timely.
• If the allocation only covers part of the transfer, the trust’s inclusion ratio determines what portion is exposed later:
  • Inclusion ratio = 0 → trust is fully exempt from GST tax.
  • Inclusion ratio = 1 → trust is fully taxable.
  • Any value between 0 and 1 means a proportional exposure.

The automatic allocation feature is a key safety net: by default the GST exemption is applied to direct skips unless the donor opts out. This explains why most taxpayers never face GST tax—even sizable gifts and bequests can fall within automatic allocations and disappear from the GST base.

Practical examples and common situations

• A lifetime gift to a grandchild can be a direct skip if it’s subject to the federal gift tax.
• A bequest to a grandson at death can be a direct skip if it’s part of the decedent’s taxable estate.
• Trust scenario: a trust pays income to the transferor’s child for life, then passes the remainder to grandchildren. When the child dies and only grandchildren remain, the trust may face a taxable termination unless GST exclusion was previously allocated.

Real‑world impacts:

• For a taxable distribution, the skip person beneficiary owes the GST tax, not the trustee (although trusts may reimburse).
• For a taxable termination, the trustee is responsible for the tax and the filing.
• For a direct skip at death, the executor handles it on the estate return.

Trustees must track what parts of a trust are GST‑exempt and what parts are not because that affects who files, who pays, and how much is due.

Age test and unrelated recipients

• For unrelated recipients, the GST rules treat the transfer as generation‑skipping if the recipient is more than 37.5 years younger than the transferor.
• This age‑based rule models generational distance when no blood relationship exists and works alongside the family‑based two‑generation test.

Key definitions and policy reference points

Policy pillars and current reference points (as of October 2025):

• Flat GST tax rate: 40%
• GST exclusion: $13,610,000 per person (2024) — still the reference point in October 2025
• Automatic allocation: GST exemption is applied by default to direct skips unless the donor elects out

Key definitions (summary):

• Skip person: two or more generations below the transferor; or >37.5 years younger if unrelated.
• Direct skip: transfer to a skip person subject to gift or estate tax.
• Taxable termination: trust interest for a non‑skip person ends and only skip persons remain.
• Taxable distribution: distribution to a skip person that is not a direct skip and not a termination.

Important exceptions:

• Deceased parent rule: removes skip status when the intermediate generation has died.
• Growth protection: after a proper GST allocation, future trust growth is also exempt.

Compliance, recordkeeping, and common pitfalls

Advisers emphasize that the risk usually comes from a chain of small missteps rather than a single huge error. Common issues include:

• A poorly timed large gift that uses up exclusion.
• A trust drafted without clear beneficiary tiers or allocation instructions.
• Missed filings that leave the IRS with a different view of the inclusion ratio.

Practical steps to reduce risk:

1. Map intended beneficiaries by generation and relationship to confirm skip person status.
2. Track lifetime gifts and prior allocations to know remaining GST exclusion.
3. For trusts, decide the GST goal at funding: fully exempt (aim for inclusion ratio 0) or fully non‑exempt (accept inclusion ratio 1).
4. Keep clear records of any elections to opt out of automatic allocation.
5. Build reminders for filing deadlines and trust milestone dates (e.g., life beneficiary deaths).

Common misunderstandings:

• A grandchild is not always a skip person—see the deceased parent rule.
• Not every trust distribution to a grandchild is a direct skip; it may be a taxable distribution instead.
• Allocating only a fraction of exclusion can leave later events taxable under the inclusion ratio.

Filing logistics and resources

Filing remains procedural but exacting:

• Form 706: estate return; must be mailed; 9‑month deadline (unless extended). Use it to report the gross estate, deductions, compute estate tax, and report direct skips at death.
• Form 706-GS(T): used for trust events (taxable terminations and taxable distributions); trustees must follow instructions to compute and report GST due.

IRS resources:
– Form 706
– Form 706-GS(T)
– Estate and Gift Tax

These links include instructions, filing addresses, and agency guidance.

Takeaways for families and advisers

• The GST tax is not a replacement for the gift or estate tax; it stacks on top.
• For most families, the $13,610,000 exemption (2024) and automatic allocation mean the GST is a non‑issue.
• For larger estates and long‑horizon trusts, careful allocation and recordkeeping can shelter multi‑generation wealth growth from GST.
• Roles are clear: estate for direct skips at death, trustee for taxable terminations, and beneficiary for taxable distributions—knowing these roles speeds compliance and reduces disputes.
• As of October 2025, there were no announced legislative changes to the GST regime or to the 2024 benchmark exclusion—so current planning can rely on the existing rules while watching for future updates.

For official forms and instructions, see the IRS pages for Form 706 and Form 706-GS(T). Broader guidance on the estate and gift system, including who must file and when, is available on the IRS’s Estate and Gift Tax page.