Wiles Law Firm, LLC
Last Updated June 12th, 2025
When planning for the future, preserving your legacy for your loved ones becomes a deeply personal and important goal.
If you wish to pass down assets to your children, grandchildren, and beyond, thoughtful preparation is key to safeguarding what you’ve worked hard to build. By being mindful of potential tax implications, such as the generation-skipping tax, you can help ensure that your legacy reaches future generations without unnecessary financial burdens.
The Generation-Skipping Transfer (GST) tax is a federal tax applied when assets are transferred to beneficiaries that are either two generations below the transferor at least 37½ years younger than the donor, if they are non-relatives.
It’s worth noting that the generation-skipping tax rate is steep.
It matches the highest federal estate tax rate, currently at 40%. This flat rate applies in addition to any estate or gift taxes, meaning any transfers exceeding the exemption limit will face this flat 40% tax.
The positive news is that you can leverage a generous exemption to transfer wealth to younger generations while minimizing taxes.
As of 2024, the generation-skipping tax exclusion is set at $13.61 million per individual and $27.22 million for married couples. This exemption means you can pass substantial wealth across generations without the immediate burden of estate or gift taxes. If the value of the assets transferred exceeds this limit, the transfer will be subject to the 40% GST tax. However, these figures are scheduled to decrease in 2026 unless further legislation is passed.
