The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 that was signed into law by the president has an added benefit applicable to the GST tax only.

Generation Skipping Tax Savings in 2010

Essentially, there is no generation skipping transfer tax imposed in 2010. Obviously, there isn’t much time left in 2010 so to take advantage of this tax saving opportunity, you must act immediately.

After December 31, 2010, the generation skipping transfer (GST) tax exemption increases to $5 million.

What is the Generation Skipping Transfer Tax?

The generation skipping transfer tax is a tax on the transfer of wealth to a person who is two or more generations below you. The GST tax, which was repealed under the prior law, was reinstated with the new tax law. Although it has been reinstated, the effective generation skipping tax rate is 0 percent.

The 0 percent rate is applicable to both a transfer in trust or outright for the benefit of a skip person (or persons). Keep in mind that while a generation skipping transfer will incur no GST tax, a transfer that exceeds the gift tax exclusion (currently $1 million) would be subject to gift tax.

Estate Planning Opportunity

If you are interested in this short lived estate planning opportunity, I recommend that you meet with an estate planner or your tax advisor as soon as possible. As I mentioned previously, this tax saving opportunity expires on December 31, 2010.

Related posts:

1. Estate Planning Components of the Tax Relief Act
2. Estate Tax in 2011
3. Gift Tax in 2010
4. Estate Tax Exemption Changes
5. 5 Year End Tax Planning Tips