What Should You Know About Generation-Skipping Trusts in Florida?

What is a Generation-Skipping Trust?

A generation-skipping trust is a legal arrangement where your assets are passed directly to your grandchildren or even later generations, skipping your children. This type of trust can help reduce the amount of estate taxes that would otherwise be paid if the assets were passed from one generation to the next consecutively.

The primary advantage of a GST is the potential tax savings. Normally, when assets are passed from parents to children, estate taxes apply, and the same happens when those assets are passed from children to grandchildren. A GST helps avoid double taxation by skipping a generation, which can preserve more of your wealth for future generations.

How Does a Generation-Skipping Trust Work in Florida?

Florida follows federal rules regarding generation-skipping trusts, which means the state does not impose additional taxes on these trusts. This tax applies when assets exceed the exemption limit, which is periodically adjusted for inflation. As of recent updates, the GSTT exemption is quite high, so stay informed about any changes in tax laws.

Setting Up a Generation-Skipping Trust

• Choose a Trustee: Select a reliable trustee to manage the trust. This person or institution will be responsible for administering the trust according to your wishes.

  
  

• Draft the Trust Document: Work with an estate planning attorney to draft a trust document. This document will outline the terms of the trust, including beneficiaries, distribution plans, and any specific instructions.

  
  

• Fund the Trust: Transfer assets into the trust. This can include cash, property, investments, and other valuable items.

  
  

• Consider Tax Implications: Be aware of the GSTT and ensure your trust is structured to take advantage of the available exemptions.

Benefits of a Generation-Skipping Trust

Generation-skipping trusts offer several key benefits, including tax efficiency by reducing the estate's tax burden, asset protection from creditors and legal claims, and long-term planning that guarantees your legacy is preserved for multiple generations.

Potential Drawbacks

While generation-skipping trusts offer many benefits, they also come with potential drawbacks. These trusts can be more complex and costly to set up and maintain compared to other types of trusts. Additionally, placing assets in a GST may result in limited control over those assets.

For more information, contact our office at Askew & Associates, P.A. by calling 954-546-2699.

Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns.