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Understanding Generation-Skipping Transfer Tax and Effective Gifting Strategies

The Generation-Skipping Transfer Tax applies a hefty 48% tax rate on assets that skip generations. With a $1,500,000 exemption for Qualified Domestic Trusts (QDOT) and Bob's Trust totaling $2,000,000, careful planning is essential. Maximize tax efficiency by making yearly tax-free gifts of $11,000 per beneficiary and covering unlimited tuition or medical expenses. Strategically giving away appreciating assets removes them and their future appreciation from your estate, while the recipient assumes the capital gains tax upon selling.

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Understanding Generation-Skipping Transfer Tax and Effective Gifting Strategies

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  1. GENERATION SKIPPING TRANSFER TAX • On Assets That “Skip” a Generation • 48% Tax Rate • $1,500,000 Exemption

  2. QualifiedDomesticTrust BOB $2,000,000 BOB’S TRUST $1,500,000 BOB’S QDOT $500,000 INCOME, PRINCIPAL IF NEEDED SUE

  3. TAX-FREE GIFTS • $11,000 Per Year Per Beneficiary • Unlimited Tuition, Medical Expenses

  4. APPRECIATING ASSETS ARE BEST TO GIVE AWAY • Removes Asset and Future Appreciation From Your Estate • Asset Keeps Your Cost Basis • Recipient Pays Capital Gains Tax When Sold

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