GST rules apply to property passing two or more generations below the grantor.

GST rules apply to property passing two or more generations below the grantor.

• A. Property left in trusts that exceed the rule against perpetuity.
• B. Property passing two or more generations below the grantor.
• C. Family members of the decedent.
• D. All persons 37 1/2 years younger than the grantor.

Answer: (B)

Generation-skipping transfer rules apply when property is transferred to someone who is at least two generations younger than the grantor. This means gifts or trust distributions to grandchildren, great-grandchildren, or to trusts for those later-generation beneficiaries are subject to GST tax, because the transfer “skips” a generation. The idea is to tax transfers that would otherwise escape regular estate or gift tax by skipping a generation. That’s why the statement describing property passing to two or more generations below the grantor fits GST rules. Transfers to a child (one generation younger) or to a spouse (subject to the marital deduction, not GST) aren’t skips, and rules based on perpetuity or a fixed age difference don’t define GST transfers. So, two or more generations below the grantor is the correct description.

Generation-skipping transfer rules apply when property is transferred to someone who is at least two generations younger than the grantor. This means gifts or trust distributions to grandchildren, great-grandchildren, or to trusts for those later-generation beneficiaries are subject to GST tax, because the transfer “skips” a generation. The idea is to tax transfers that would otherwise escape regular estate or gift tax by skipping a generation. That’s why the statement describing property passing to two or more generations below the grantor fits GST rules. Transfers to a child (one generation younger) or to a spouse (subject to the marital deduction, not GST) aren’t skips, and rules based on perpetuity or a fixed age difference don’t define GST transfers. So, two or more generations below the grantor is the correct description.