Papa makes a gift in trust of $1 million, arranging for the trust to pay income
ID: 2483269 • Letter: P
Question
Papa makes a gift in trust of $1 million, arranging for the trust to pay income to his son for his life with the remaining property at his son's death passing equally to the son's children. The trustee has the right to invade the principal during the son's life for the health, support, and maintenance of any of son's children. The trustee decides to invade the principal to write checks to the colleges attended by each of the son's children for their tuition. Which type of generation-skipping transfer has occurred when the trustee makes the distribution?
a. No GST has occurred.
b. A direct skip has occurred.
c. A taxable termination has occurred.
d. A taxable distribution has occurred.
Explanation / Answer
Answer is d. A taxable distribution has occurred.
A taxable distribution is any distribution of income or property from a trust to a skip person that is not otherwise subject to estate or gift tax.
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