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a. A person who was born not more

transfer, an individual’s parent who dies

children. All of the present interests in

than 12

years after the decedent is in

no later than ninety days after a

this trust are held by skip persons.

the decedent’s generation.

transfer occurring by reason of the

Therefore, the trust is a skip person

b. A person born more than 12

death of the transferor is treated as

and you should show this transfer on

years, but not more than 37

years,

having predeceased the transferor. The

Schedule R. You should show the

after the decedent is in the first

ninety-day rule applies to transfers

estate tax value of all the property

generation younger than the decedent.

occurring on or after July 18, 2005. See

transferred to the trust even though the

c. A similar rule applies for a new

Regulations section 26.2651-1, for

trust has some ultimate beneficiaries

generation every 25 years.

more information.

who are non-skip persons.

Charitable organizations.

If more than one of the rules for

Dividing Direct Skips

Charitable organizations and trusts

assigning generations applies to a

described in sections 511(a)(2) and

Between Schedules R and

transferee, that transferee is generally

511(b)(2) are assigned to the

R-1

assigned to the youngest of the

decedent’s generation. Transfers to

generations that would apply.

such organizations are therefore not

Report all generation-skipping

If an estate, trust, partnership,

subject to the GST tax.

TIP

transfers on Schedule R unless

corporation, or other entity (other than

Charitable remainder trusts.

the rules below specifically

certain charitable organizations and

Transfers to or in the form of charitable

provide that they are to be reported on

trusts described in sections 511(a)(2)

remainder annuity trusts, charitable

Schedule R-1.

and 511(b)(2)) is a transferee, then

remainder unitrusts, and pooled income

each person who indirectly receives the

Under section 2603(a)(2), the GST

funds are not considered made to skip

property interests through the entity is

tax on direct skips from a trust (as

persons and, therefore, are not direct

treated as a transferee and is assigned

defined for GST tax purposes on page

skips even if all of the life beneficiaries

to a generation as explained in the

24) is to be paid by the trustee and not

are skip persons.

above rules. However, this look-through

by the estate. Schedule R-1 serves as

Estate tax value. Estate tax value is

rule does not apply for the purpose of

a notification from the executor to the

determining whether a transfer to a

the value shown on Schedules A

trustee that a GST tax is due.

through I of this Form 706.

trust is a direct skip.

For a direct skip to be reportable on

Generation assignment where

Examples. The rules above can be

Schedule R-1, the trust must be

intervening parent is deceased. A

illustrated by the following examples:

includible in the decedent’s gross

special rule may apply in the case of

estate.

1. Under the will, the decedent’s

the death of a parent of the transferee.

house is transferred to the decedent’s

If the decedent was the surviving

For terminations, distributions, and

daughter for her life with the remainder

spouse life beneficiary of a marital

transfers after December 31, 1997, the

passing to her children. This transfer is

deduction power of appointment (or

existing rule that applied to

made to a “trust” even though there is

QTIP) trust created by the decedent’s

grandchildren of the decedent has been

no explicit trust instrument. The interest

spouse, then transfers caused by

extended to apply to other lineal

in the property transferred (the present

reason of the decedent’s death from

descendants.

right to use the house) is transferred to

that trust to skip persons are direct

If property is transferred to an

a non-skip person (the decedent’s

skips required to be reported on

individual who is a descendant of a

daughter). Therefore, the trust is not a

Schedule R-1.

parent of the transferor, and that

skip person because there is an

If a direct skip is made “from a trust”

individual’s parent (who is a lineal

interest in the transferred property that

under these rules, it is reportable on

descendant of the parent of the

is held by a non-skip person. The

Schedule R-1 even if it is also made “to

transferor) is deceased at the time the

transfer is not a direct skip.

a trust” rather than to an individual.

transfer is subject to gift or estate tax,

2. The will bequeaths $100,000 to

Similarly, if property in a trust (as

then for purposes of generation

the decedent’s grandchild. This transfer

defined for GST tax purposes on page

assignment, the individual is treated as

is a direct skip that is not made in trust

24) is included in the decedent’s gross

if he or she is a member of the

and should be shown on Schedule R.

estate under section 2035, 2036, 2037,

generation that is one generation below

3. The will establishes a trust that is

2038, 2039, 2041, or 2042 and such

the lower of:

required to accumulate income for 10

•

property is, by reason of the decedent’s

The transferor’s generation or

years and then pay its income to the

•

death, transferred to skip persons, the

The generation assignment of the

decedent’s grandchildren for the rest of

transfers are direct skips required to be

youngest living ancestor of the

their lives and, upon their deaths,

reported on Schedule R-1.

individual, who is also a descendant of

distribute the corpus to the decedent’s

Special rule for trusts other than

the parent of the transferor.

great-grandchildren. Because the trust

explicit trusts. An explicit trust is a

has no current beneficiaries, there are

The same rules apply to the

trust as defined in Regulations section

no present interests in the property

generation assignment of any

301.7701-4(a) as “an arrangement

transferred to the trust. All of the

descendant of the individual.

created by a will or by an inter vivos

persons to whom the trust can make

This rule does not apply to a transfer

declaration whereby trustees take title

future distributions (including

to an individual who is not a lineal

to property for the purpose of protecting

distributions upon the termination of

descendant of the transferor if the

or conserving it for the beneficiaries

interests in property held in trust) are

transferor has any living lineal

under the ordinary rules applied in

skip persons (for example, the

descendants.

chancery or probate courts.” Direct

decedent’s grandchildren and

skips from explicit trusts are required to

If any transfer of property to a trust

great-grandchildren). Therefore, the

would have been a direct skip except

be reported on Schedule R-1

trust itself is a skip person and you

regardless of their size unless the

for this generation assignment rule,

should show the transfer on

executor is also a trustee (see Executor

then the rule also applies to transfers

Schedule R.

from the trust attributable to such

as trustee on page 26).

4. The will establishes a trust that is

property.

to pay all of its income to the

Direct skips from trusts that are

Ninety-day rule. For purposes of

decedent’s grandchildren for 10 years.

trusts for GST tax purposes but are not

determining if an individual’s parent is

At the end of 10 years, the corpus is to

explicit trusts are to be shown on

deceased at the time of a testamentary

be distributed to the decedent’s

Schedule R-1 only if the total of all

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Instructions for Schedules

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2008 Page 25

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