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.
Legal Use & context
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.
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.