The generation-skipping transfer tax becomes relevant in the Form 706 process when property transfers skip a generation, such as transfers to grandchildren or certain trusts. Within the federal estate tax system, these transfers are subject to a separate tax framework designed to ensure that transfer taxes are not avoided by bypassing an intermediate generation.
Why the GST tax is evaluated alongside the estate tax
The estate and GST tax systems operate in parallel but are coordinated through Form 706 when transfers occur at death. The filing allows the Internal Revenue Service to determine whether property included in the gross estate also triggers GST consequences and how exemptions are allocated across taxable transfers.
The official structure and statutory role of Form 706 and its schedules are described on the IRS Form 706 document page.
When GST rules are triggered at death
GST tax considerations arise when property passes to skip persons or to trusts that may later make distributions to skip persons. These situations require the system to track exemption allocations and determine whether GST tax is imposed at the time of transfer or deferred to later events.
The analysis focuses on the identity of transferees and the structure of the transfer rather than on the amount of estate tax due.
Allocation of GST exemption through Form 706
Form 706 serves as the mechanism for allocating the decedent’s GST exemption to qualifying transfers and trusts. This allocation affects whether future distributions or terminations will be subject to GST tax and how inclusion ratios are calculated.
Once allocated, GST exemption amounts become part of the estate’s permanent tax record and influence later trust administration.
Interaction with marital transfers and QTIP elections
GST considerations often intersect with marital transfers, particularly when qualified terminable interest property elections are made. In these cases, the timing and structure of exemption allocation determine how property is treated when it eventually passes beyond the surviving spouse.
The relationship between marital transfers and GST treatment is part of the broader filing sequence described in how the Form 706 filing process works.
How GST fits into the overall Form 706 process
The GST tax does not replace the estate tax but operates as an additional layer within the Form 706 framework. After assets are identified, valued, and reduced by deductions, the system evaluates whether GST rules apply and records exemption allocations or tax due.
The central reference point for understanding how this stage connects to all other Form 706 scenarios is available in the Form 706 overview.