Generation Skipping Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Generation Skipping, written in plain English, along with examples of how it is used.
What is Generation Skipping?
(adj) Generation Skipping is the omission of an in between generation while bestowing or providing gifts in a will or trust . Eg. Naming the grandchild as the beneficiary of a trust with out considering own child
History and Meaning of Generation Skipping
Generation skipping is a legal term that refers to the practice of skipping a generation when passing down assets and property through a will or trust. This means that instead of leaving property or assets to their children, a person may choose to leave them to their grandchildren or even great-grandchildren. The purpose of this practice is often to avoid certain taxes that might come into play if assets were passed down directly to the next generation.
The use of generation skipping in estate planning became more popular in the 1970s when changes were made to estate and gift taxes that made it more advantageous to pass down assets in this way. Today, generation skipping is a common estate planning strategy for those who want to minimize taxes and maximize the amount of assets they can leave to their heirs.
Examples of Generation Skipping
- Instead of leaving her assets to her children, Sarah sets up a trust for her grandchildren, effectively generation skipping in her estate planning.
- John leaves his house and other property to his great-nieces and nephews, rather than his own children, in order to avoid certain taxes.
- In her will, Jane specifies that a portion of her estate should be left to her great-grandchildren, even though her own children and grandchildren are still alive.
Legal Terms Similar to Generation Skipping
- Trusts: A legal arrangement whereby property or assets are held by a third party (the trustee) for the benefit of others (the beneficiaries).
- Estate Planning: The process of arranging for the transfer of one's assets and property after death, often involving the use of wills, trusts, and other legal documents.
- Inheritance: The passing down of assets and property from one generation to the next upon the death of the original owner.