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Craig Lundquist, MBA, ChFC®, CRPC®
VP of Wealth Management
651-773-2757
Kristin Becker
Senior Administrative Assistant
651-773-2821
Ideal Wealth Advisors
Located at Ideal Credit Union
8499 Tamarack Road
Woodbury, MN 55125
CRPC conferred by College for Financial Planning
May/June 2025
A Generation-Skipping Trust May Be a Smart Move
This unique trust allows you to transfer assets to beneficiaries two or more generations younger than you — your grandchild or great-grandchild, for instance (or anyone else at least 37.5 years younger than you) — in a tax-advantaged way.
How It Works
Say you use a generation-skipping trust (GST) to transfer assets directly to a grandchild rather than giving them to your child. You avoid estate tax being imposed twice on those assets—once when passing to your child and again when they pass to the grandchild. Giving assets directly to a great-grandchild avoids an additional round of estate tax.You can also use a GST as an incentive for behaviors you'd like to encourage or discourage in the younger generation. For example, you might stipulate that your beneficiary receives distributions only if they maintain a certain college GPA, successfully complete a rehab program, are self-supporting, or if the funds are used for specific purposes, such as purchasing a home or starting a business.
A GST will impact three generations and may remain in effect for a long time. Because your trustee will hold significant power, you should carefully consider your choice. Selecting a family member could breed resentment among other family members and create issues. Additionally, you should appoint successor trustees as well.
Not Tax Free
Assets passing through a GST may be subject to the generation-skipping transfer tax. This tax rate is the same as the estatetax rate. However, the generation-skipping transfer tax generally only applies to estates greater than $13.99 million in 2025.An important note: Unless new legislation is passed this year, this exemption amount is set to fall to $5 million in 2026. So, if you think a GST might fit your planning, now may be the time to talk with your trusted legal and financial professional to learn more details.
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