Attorney
A generation-skipping trust can benefit grandchildren or other younger beneficiaries while providing continuing management of family property. With appropriate tax planning, it may limit transfer-tax exposure across generations. Those results depend on funding, exemption allocation and the rights granted under the trust.
What Is a Generation-Skipping Trust?
A generation-skipping trust, sometimes called a GST, is generally an irrevocable trust created for beneficiaries who are two or more generations below the person establishing it. Grandchildren and great-grandchildren are common beneficiaries. Certain unrelated individuals who are substantially younger than the person creating the trust may also qualify as “skip persons” under federal tax law.
Despite the name, this kind of trust need not exclude your children. It can permit them to receive income or other benefits while preserving property for younger generations. Whether property is included in a child’s taxable estate depends on the rights and powers created; GST exemption allocation and estate-tax inclusion are separate questions.
How Does a Generation-Skipping Trust Work?
You transfer selected assets to the trust and appoint a trustee to manage them according to your instructions. The trust document can establish when distributions are permitted and what purposes they may serve.
For example, the trustee might be authorized to use trust funds for:
- A beneficiary’s education or health care
- The purchase of a first home
- Support during a financial emergency
- Distributions at designated ages
Because these trusts are generally irrevocable, you usually give up the ability to reclaim the assets or freely rewrite the terms. That loss of control is one reason careful drafting and asset selection matter.
Does a Generation-Skipping Trust Avoid Taxes?
A GST does not automatically eliminate federal transfer taxes. The federal generation-skipping transfer tax applies to certain transfers that bypass a generation and operates in addition to federal gift and estate tax rules.
Each person has a federal GST tax exemption that can be allocated to qualifying transfers. When the exemption is properly allocated, assets and future appreciation may pass to skip beneficiaries without incurring GST tax. Incorrect funding, valuation, or exemption reporting can produce a very different result.
Federal exemption amounts and tax laws can change. Florida does not currently impose a separate state estate tax, but federal tax planning remains relevant for families with significant assets. Coordination with tax professionals is often appropriate.
What Are the Benefits of a Generation-Skipping Trust?
For the right family, a GST may:
- Reduce exposure to transfer tax at multiple generational levels
- Keep assets under structured management for younger beneficiaries
- Preserve family property or business interests
- Provide safeguards against a beneficiary’s creditors or divorce claims
- Prevent a large inheritance from being distributed all at once
Protection is not absolute. The results depend on the trust language, the beneficiary’s level of control, and applicable law.
How Is a Generation-Skipping Trust Different From a Dynasty Trust?
The terms overlap, but they describe different features. “Generation-skipping” primarily refers to the beneficiaries and federal transfer-tax treatment. A dynasty trust is designed to continue for several generations, often for as long as state law and the trust terms allow.
A dynasty trust may use GST tax planning, making it both a dynasty trust and a generation-skipping trust. However, not every GST is intended to last for many generations. Some terminate when grandchildren reach specified ages or after the death of the grantor’s children.
For trusts created on or after July 1, 2022, Florida’s statutory rule against perpetuities allows a 1,000-year period in place of its usual 90-year alternative, unless the trust terms require earlier vesting or termination. The governing instrument and applicable law still determine the permissible duration of a particular arrangement.
Who Should Consider a Generation-Skipping Trust?
A GST may be worth considering if you expect to leave substantial assets, want to provide for grandchildren, or hope to keep a family business or investment portfolio intact. It can also help when your children are financially secure, but you still want them to receive limited support.
The trust should fit within a broader estate plan that addresses incapacity, beneficiary needs, asset ownership, and other transfer goals. Your will, beneficiary designations, and any revocable living trust should work together with the GST.
Build a Plan That Reaches Future Generations
Generation-skipping trusts require careful attention to tax elections, trust terms, and long-term family needs. At Verras Law, we help Florida families determine whether this strategy fits their goals and develop trusts suited to the people and assets involved. Contact us to discuss preserving your wealth for future generations.
Sources: Florida Statutes § 689.225; IRS Form 709 instructions; Florida Statutes § 736.0503.
Updated October 26, 2026.