Which beneficiary qualifies for the generation-skipping tax predeceased ancestor exception?

Which beneficiary qualifies for the generation-skipping tax predeceased ancestor exception?

• A. The child of his deceased child.
• B. The children of his living children.
• C. His grandnephew whose parents are deceased.
• D. His niece, if his brother is deceased.

Answer: (A)

The key idea is that the generation-skipping tax (GST) applies to transfers to people in a younger generation, but there’s an exception for descendants of someone who died before the transferor. If the beneficiary is a lineal descendant of a predeceased ancestor, the transfer can be treated as exempt from GST tax. Here, the beneficiary is the child of the donor’s deceased child. That person is a grandchild of the donor and, importantly, a lineal descendant of a predeceased ancestor—the donor’s child who died before him. Because the recipient fits as a descendant of a predeceased ancestor, the transfer can qualify for the GST predeceased ancestor exception and avoid GST tax. The other choices involve relatives who are not in that direct lineal-descendant relationship to a predeceased ancestor (they’re collateral relatives in different generations), so they don’t meet the exception.

The key idea is that the generation-skipping tax (GST) applies to transfers to people in a younger generation, but there’s an exception for descendants of someone who died before the transferor. If the beneficiary is a lineal descendant of a predeceased ancestor, the transfer can be treated as exempt from GST tax.

Here, the beneficiary is the child of the donor’s deceased child. That person is a grandchild of the donor and, importantly, a lineal descendant of a predeceased ancestor—the donor’s child who died before him. Because the recipient fits as a descendant of a predeceased ancestor, the transfer can qualify for the GST predeceased ancestor exception and avoid GST tax.

The other choices involve relatives who are not in that direct lineal-descendant relationship to a predeceased ancestor (they’re collateral relatives in different generations), so they don’t meet the exception.