GST TAX——GENERATION SKIPPING TAX
Father passes away with a large estate and will be paying large estate taxes. No wife. If father leaves IRA to his son as the primary beneficiary and the son disclaims his interest so that it goes to the contingent beneficiary, what happens?
The contingent beneficiary is the deceased father’s grandson. Is the GST TAX activated ? The amount of the IRA is 6,500,000.
Permalink Submitted by mk foss on Sat, 2010-08-28 00:25
What year are you talking about? There is no estate tax or GST tax for 2010.
Permalink Submitted by William Bailey on Sat, 2010-08-28 16:48
Father passed away on December 30, 2009.
Permalink Submitted by Bruce Steiner on Sun, 2010-08-29 02:47
The GST exemption was $3.5 million in 2009, so a $6.5 million transfer to a grandson will result in GST tax. That’s not necessarily a bad result. It would allow for a longer stretchout. And absent a disclaimer, there would be an estate or gift tax if the son were to give or leave the assets to or in trust for the grandson. But whether it’s advisable in this particular case depends on the facts, and on the son’s objectives.
Given the amount involved, the original poster should consult with competent tax/estates counsel, who can give him specific advice based upon the particular facts and his objectives. He should do so quickly since a disclaimer must be done, if at all, within 9 months from the date of death (September 30, 2010, in the case of a person dying on December 30, 2009), and the estate tax return is likewise due 9 months after death.
Bruce Steiner, attorney
NYC
also admitted in NJ and FL