What Is a Generation Skipping Trust?

A generation skipping trust is a type of estate planning tool that individuals can use to provide their assets to their grandchildren instead of their own children. With this type of trust arrangement, they will put specific assets into the ownership of the trust. Then, when they die, the assets will not pass on to their children. Instead, the assets will remain in the trust for a certain amount of time until they will be given to the grandchildren. In many cases, people will do this in order to avoid making their children pay large amounts of estate taxes.

In some cases, this type of generation skipping trust can still be used to benefit the children of the grantors. For example, the grantors could set up a trust to provide the income to the children while keeping the actual assets in the trust at all times. Then after a certain amount of time, the assets will be passed onto the grandchildren. By doing this, the grantors can provide some type of financial assistance to their children and their grandchildren at the same time. With this process, the grantors have to entrust the assets to a trustee to watch over them until the proper time.