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Who is a skip person?
A natural person is generally a skip person if the IRS assigns that person to a generation at least two generations below the transferor. A grandchild may meet that test, but a gift to a grandchild is not automatically a taxable skip: generation-assignment rules and exceptions can affect the result, including rules involving a deceased intervening parent.
A trust can also be a skip person. Under the IRS’s 2026 Form 709 instructions, a trust generally qualifies if all interests in the transferred property are held by skip persons. A trust with no present interests may also qualify when future distributions or termination can benefit only skip persons. The trust terms and the people who hold interests or could receive property therefore matter, not just the name of the trust’s current beneficiary.
What kinds of events can trigger GST tax?
The tax system groups GST events into three types. A transfer’s timing and the trust’s terms determine which type applies; the same trust may have GST-relevant events at different stages.
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| Event | What it generally involves | Typical reporting route |
|---|---|---|
| Direct skip | A transfer subject to gift-tax reporting during life, or an analogous transfer at death subject to estate-tax reporting, directly to a skip person. | Form 709 for a lifetime transfer; Form 706 for an estate-time transfer. |
| Taxable distribution | A distribution from a trust to a skip person that is not a direct skip or taxable termination. | The skip-person recipient generally reports the tax on Form 706-GS(D); the trustee reports the distribution on Form 706-GS(D-1). |
| Taxable termination | Generally, the conclusion of an interest in trust property when a nonskip person does not immediately hold an interest and a later distribution to a skip person remains possible. | The trustee uses Form 706-GS(T) for certain taxable terminations. |
Direct skips
A direct skip is a transfer straight to a skip person, rather than a later trust distribution or a trust termination. For a lifetime transfer, the 2026 Form 709 instructions describe the relevant transfer as one that is subject to gift-tax reporting, transfers an interest in property, and is made to a skip person. At death, the Form 706 instructions apply the analogous estate-tax reporting condition. The classification matters because a lifetime direct skip and an estate-time direct skip use different returns.
Taxable distributions
A taxable distribution is a trust distribution to a skip person, unless it is instead a direct skip or taxable termination. The recipient—not the trustee—is generally responsible for computing and reporting the tax on Form 706-GS(D). The trustee provides distribution information on Form 706-GS(D-1). The IRS’s December 2025 Form 706-GS(D) instructions generally set the recipient’s return due date as April 15 of the year after the distribution; check the instructions for the relevant tax year.
Taxable terminations
A taxable termination generally occurs when an interest in trust property ends and, immediately afterward, no nonskip person has an interest, while a future distribution to a skip person remains possible. The precise trust terms and who has interests at the time of termination determine whether the event meets the rule. For certain taxable terminations, the trustee reports on Form 706-GS(T).
How the GST exemption and tax rate affect the bill
The IRS’s July 2026 Form 706 instructions state a GST exemption of $15,000,000 for 2026. That is a year-specific figure, not a per-recipient allowance and not an amount to apply automatically to transfers made in other years. The exemption available for a transfer depends on its year and on exemption allocations made for that transfer.
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1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsAllocating GST exemption affects a trust’s inclusion ratio—the share of a transfer treated as subject to GST tax. The 2026 Form 709 instructions describe automatic allocation rules for some direct and indirect skips, as well as elections to opt out in specified cases. Allocations are generally irrevocable, so a transfer’s reporting history can matter years later when a trust distributes property or terminates.
The IRS’s December 2025 Form 706-GS(T) instructions state a 40% GST tax rate for transfers after December 31, 2012. This is the rate used in the tax computation; it does not mean that every transfer is taxed at 40% of its full value. The exemption allocation and resulting inclusion ratio affect how much of a transfer is subject to GST tax.
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GST exemption is distinct from portability of a deceased spouse’s unused estate-tax exclusion. IRS instructions state that a deceased spouse’s unused exclusion (DSUE) portability does not apply to GST exemption.
Which forms report GST tax?
The filing party depends on whether the event is a lifetime transfer, an estate-time transfer, or a later trust event:
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- Form 706: The estate tax return that also reports certain direct skips occurring at death.
- Form 706-GS(D-1): Trustee reporting of a taxable distribution to a skip person.
- Form 706-GS(D): The skip-person recipient’s return to compute and report tax on taxable distributions.
- Form 706-GS(T): Trustee reporting for certain taxable trust terminations.
Confirm the applicable tax-year form and instructions, filing requirement, responsible filer, and due date before submitting a return. The 2026 Form 709 instructions reviewed for this article were marked draft, so filing-specific details should be checked against the final IRS revision.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why a trust gift can have later GST consequences
A gift to a trust may not produce GST tax at the time it is made, yet the trust could later make a taxable distribution or experience a taxable termination. Gift-tax annual-exclusion treatment and GST treatment do not always align for trust gifts. This is why the recipient’s status, the trust’s present and future distribution terms, and any exemption allocations must be considered together rather than treating the initial gift as the only relevant event.
What to check for a real transfer
- Identify the transferor, transfer year, and whether the transfer occurred during life or at death.
- Determine the generation assignment of each relevant person, including any applicable exceptions.
- Read the trust provisions to identify current interests and possible future distributions or termination beneficiaries.
- Review prior GST exemption allocations and the trust’s inclusion ratio.
- Determine whether the event is a direct skip, taxable distribution, or taxable termination, then verify the current IRS form and filing instructions.
These are federal tax rules, and the result for a particular family can depend on the family tree, transfer year, trust document, property value, prior allocations, and applicable exceptions. A qualified estate and gift tax professional can evaluate a specific transfer or trust.
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