Understanding Skip Person [Internal Revenue]: A Comprehensive Guide
Definition & meaning
A "skip person" refers to an individual or trust that is involved in generation-skipping transfers, which are transfers of assets to someone who is more than one generation below the transferor. In simpler terms, this means:
An individual who is at least two generations younger than the person giving the gift or inheritance.
A trust where all beneficiaries are skip persons, or where no beneficiaries exist except for skip persons, and distributions to non-skip persons are highly unlikely.
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The term "skip person" is primarily used in the context of estate and gift tax law. It is crucial for determining the applicability of the Generation-Skipping Transfer Tax, which is imposed on transfers to skip persons. This concept is relevant in various legal areas, including:
Estate planning
Tax law
Trust law
Individuals can manage their estate planning through legal forms tailored for these purposes, available via resources like US Legal Forms.
Key Legal Elements
Real-World Examples
Here are a couple of examples of abatement:
Here are a couple of examples to illustrate the concept of a skip person:
Example 1: A grandparent transfers assets directly to their grandchild. The grandchild is a skip person since they are two generations below the grandparent.
Example 2: A trust is established for the benefit of grandchildren only. Since all beneficiaries are skip persons, the trust qualifies as a skip person trust.
Relevant Laws & Statutes
The primary legal reference for skip persons is found in:
26 CFR 26.2612-1(d), which outlines the definitions and criteria for skip persons in relation to the Generation-Skipping Transfer Tax.
Section 2651 of the Internal Revenue Code, which provides the framework for determining generation assignments.
Comparison with Related Terms
Term
Definition
Difference
Skip Person
An individual or trust that is two generations below the transferor.
Specifically relates to generation-skipping transfers.
Beneficiary
A person entitled to receive benefits from a trust or estate.
Does not necessarily imply a generational gap.
Generation-Skipping Transfer Tax
A tax on transfers to skip persons.
Refers specifically to the tax implications rather than the parties involved.
Common Misunderstandings
What to Do If This Term Applies to You
If you are considering making a transfer to a skip person or establishing a trust that includes skip persons, it's important to:
Consult with a legal professional to understand the tax implications.
Explore ready-to-use legal forms available through US Legal Forms to assist in your estate planning.
Ensure compliance with IRS regulations regarding generation-skipping transfers.
Quick Facts
Attribute
Details
Definition
An individual or trust that is two generations below the transferor.
Applicable Law
26 CFR 26.2612-1(d)
Tax Implications
Subject to Generation-Skipping Transfer Tax
Probability Threshold
Less than five percent chance of distribution to non-skip persons.
Key Takeaways
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FAQs
A skip person is an individual or trust that is more than one generation below the transferor, often relevant in estate planning and tax contexts.
This tax applies to transfers made to skip persons, ensuring that significant wealth transfers across generations are taxed appropriately.
Yes, a trust can be classified as a skip person if all beneficiaries are skip persons or if no distributions are made to non-skip persons.
