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Mastering IRC 2632 GST Exemption Allocation Rules: Identifying GST Trusts and Indirect Skips

Electing out of Default Allocation Treatment, Making Retroactive Allocations and Using Allocation Ordering Rules

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, June 22, 2017

Recorded event now available

This course will provide tax advisers and compliance professionals with a thorough and practical exploration of the GST exemption allocation rules in IRC Section 2632. The panel will take a line-by-line approach to the Code provisions, discussing default treatment and going in depth into the elections available in subsections 2632(b) and 2632(c). The webinar will also provide useful guidance into translating the election provisions onto Form 709 Schedule A Parts 2 and 3.

Description

Critical to mastering multi-generational gift tax planning and compliance is a thorough understanding of the provisions and rules found in IRC 2632 and its regulatory guidance. Section 2632 sets the rules for generation skipping tax exemptions and is one of the most complex aspects of the wealth transfer tax regime, and advisers can avoid costly tax and penalties through accurate and careful application of the 2632 provisions.

Section 2632(b)(2) states the general rule that a transferor’s unused GST exemption is automatically allocated to any direct skip to the extent necessary to bring the inclusion ratio of the transferred property to zero. The Code allows taxpayers who made direct skips to opt out of the automatic allocation rule by making an election under Section 2632(b)(3). This election is reported on Form 709 Schedule A, Part 2—Direct Skips.

IRC 2632(c)(3) defines “indirect skips” as transfers to a trust that may have a generation skipping transfer in the future. Section 2632(c)(3)(b) lists the characteristics of a GST trust, and provides the default rules for allocating GST exemptions to GST trusts on indirect skip transfers. As in direct skips, Section 2632(c)(5) provides for an election out of the default treatment. Tax professionals must grasp the 2632(c) provisions identifying trusts that may have GST consequences to avoid unexpected GST tax in the future.

Listen as our experienced panel provides a comprehensive guide to the Section 2632 rules on allocating GST exemptions to minimize the tax impact of GST tax.

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Outline

  1. Section 2632(b) direct skip general rule on exemption allocation
  2. Election provisions and mechanics for direct skips in Section 2632(b)(3)
  3. Section 2632(c)(3)(B) definitions of GST trusts
  4. Election to opt into and out of general exemption allocation rules for indirect skip transfers
  5. Retroactive allocation provisions

Benefits

The panel will discuss these and other important issues:

  • Identifying provisions in trust documents that may require transfers to be reported as an indirect skip transaction under Section 26632(c)
  • When would a taxpayer want to elect out of deemed allocation under 2632(b)?
  • Reporting elections on Form 709 Schedule A
  • Exemption allocation rules for transfers to trusts found in Section 2632(c)
  • Retroactive allocations under Section 2632(d)

Faculty

Zeydel, Diana
Diana S.C. Zeydel
Shareholder
Greenberg Traurig

Ms. Zeydel is the National Chair of the firm’s Trusts and Estates practice, and she focuses on estate, trust and...  |  Read More

Nathan R. Brown
Nathan R. Brown
Proskauer Rose

Mr. Brown advises clients on a wide range of tax and estate planning matters, as well as estate and trust...  |  Read More