Total Cost of GST Transfer

[Kathleen Reynolds]

#2923

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Determines the actual total dollar amount (or real cost) needed to transfer a target amount through GST to a grandchild or other “skip person.” The calculation uses the GSTT applicable rate (determined by the Gen. Skip calculator) and the Estate/Gift Tax rates (the donor’s estate tax bracket) to arrive at the total amount of taxes applicable to the transfer. The economic differences between “tax exclusive” and “tax inclusive” transfers are also shown.

The GST has been used primarily as a method to keep property out of the taxable estates of the immediate generation of a family. The beneficiary would be permitted to have control of the income, use the principal as needed, and control distribution of the property as long as the beneficiary does not have a general power of appointment.

Entering Data

1. GSTT Applied Rate: Enter the applicable rate (determined by the Gen. Skip calculation). The GSTT rate is the maximum estate tax rate, which is 55% through 2001, 50% in 2002, 49% in 2003, 48% in 2004, 47% in 2005, 46% in 2006, 45% for 2007 through 2009, 0% in 2010, 35% for 2011 and 2012, and 40% for years after 2012.
2. Estate/Gift Tax: Enter the donor’s estate tax bracket rate.
3. Target Transfer to Grandchild: Enter the amount to be transferred.
4. Transfer Type The GSTT is computed differently depending on the type of transfer involved. Select one of the following types from the list by clicking its radio button:
   • Lifetime Direct Gift
   • Testamentary Direct Skip (assumes GSTT paid out of other assets)
   • Taxable Termination or Distribution (where original transfer was by gift)
   • Testamentary Taxable Termination or Distribution (where original transfer was testamentary)

Results

The Summary Tab (calculation results) displays all of the figures that are necessary to arrive at the total dollar amount that is needed to transfer a specified amount of money through GST. The results show not only the real cost of transferring the target amount, but also the differences between “tax exclusive” (direct skips) and “tax inclusive” (taxable distributions and taxable terminations).

The Explanation tab shows a walk-through of the calculation using sample numbers. This helps you see each of the calculations it determined.

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