As a result of successful business investments made during their 35 years of mar

Question

As a result of successful business investments made during their 35 years of marriage, Peggy and Bob have acquired substantial wealth. To reduce their estates and minimize taxes, their financial planner suggests they start a gifting program to their children and grandchildren. Assuming no prior gifts, if they elect to gift split, what is the maximum amount Peggy and Bob could give directly to their grandchildren (ignoring the annual exclusion) without incurring a generation-skipping transfer tax?

(A) $5,430,000.

(B) $2,000,000.

(C) $10,860,000.

(D) $3,000,000.

Provide a detailed explanation for your answer. Only answer if you have a strong estate planning background.

Explanation / Answer

As the current Generation skipping tansfer tax exempion limit is $5.43million ($10.86 million for a married couple), upto $10.86 million of gifts in gift split process will not attract any Generation skipping transfer Tax.

As the grandparents have not made any prior gifts , under gift split method they can gift $ 5.43 million each or in total $10.86 million to the grandchildren.

So option C is correct

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