Complex trusts, such as qualified personal residence trusts and grantor retained annuity trusts, pose the additional problem of the estate tax inclusion period
A donor therefore cannot allocate GST exemption to a grantor retained annuity trust or qualified personal residence trust--where the trust property is included in her gross estate if she dies before her retained interest in the trust terminates--until the estate tax inclusion period
ends (when the grantor dies, a generation-skipping transfer occurs with respect to the property, or the grantor's retained interest in the trust expires).
Allocating GST Tax Exemption During an Estate Tax Inclusion Period
The final regulations on automatic allocation to an indirect skip subject to an estate tax inclusion period
(ETIP) have been revised to match rules for a direct skip, so that the allocation to a direct or an indirect skip is deemed to be made at the ETIP's close.
Finally, it suggests including examples in the final regulations that show how the deemed allocation rules for indirect skips apply when trusts subject to an estate tax inclusion period
(ETIP) terminate on the expiration of an ETIP and distribute assets to other trusts that may be GST trusts.
For indirect skips made during life after 2000, the transferors GST tax allocation is automatically applied as of the date of the transfer (for transfers subject to an estate tax inclusion period
, as of the close of such period).
The grantor's retained term would be an estate tax inclusion period
Finally, the generation-skipping transfer tax exemption can be allocated on the sale date with an ISDT, while this cannot be done with a GNAT until the end of the term (because of the estate tax inclusion period
The final regulations also provide some clarification of the rules in connection with an estate tax inclusion period