The GSTT adds a flat 40% tax on top of estate or gift tax when you leave assets to a "skip person" - typically a grandchild or a trust more than one generation below you. Enter your transfer and used exemption to estimate the federal GSTT owed.
Each row below is produced by the same formula the calculator uses (2025 GST exemption of $13,990,000, flat 40% rate).
| Scenario | Transfer | Exemption Used | Taxable Transfer | GSTT Owed |
|---|---|---|---|---|
| Grandparent trust, no prior exemption | $15,000,000 | $0 | $1,010,000 | $404,000 |
| Exemption fully allocated already | $20,000,000 | $13,990,000 | $20,000,000 | $8,000,000 |
| Small bequest under the exemption | $5,000,000 | $0 | $0 | $0 |
The third scenario shows that a transfer fully covered by remaining GST exemption incurs no GSTT at all - only the unexempted portion is taxed at 40%.
Congress created the GSTT to stop families from avoiding one layer of estate tax by gifting or bequeathing assets directly to grandchildren. Without it, wealth could skip a generation's estate tax each time. The tax applies to three events: direct skips (a gift straight to a skip person), taxable distributions (from a trust), and taxable terminations (when a trust's interest ends).
Anyone assigned to a generation more than one level below yours - grandchildren, and generally anyone under 37 1/2 years younger than you. A trust is a skip person if all its beneficiaries are skip persons.
Here is the key point most people miss: the GST exemption of $13,990,000 is separate from the estate and gift tax exemption. Allocating it to a transfer is what shelters that transfer from the 40% GSTT. Once spent, later transfers to skip persons are fully taxable. This is why dynasty trusts must be drafted carefully to allocate exemption at inception.
The GSTT rarely applies to modest families. It bites when a single transfer exceeds the remaining GST exemption - most often with dynasty trusts, large irrevocable life insurance trusts (ILITs) funded beyond the exemption, and grandparents who fund 529 plans or outright gifts for grandchildren after already using their exemption. Because the GSTT stacks on top of gift or estate tax, the same dollar can face an effective combined rate near 80% when the exemption is exhausted. That is why estate attorneys treat exemption allocation as a front-loaded decision: you cannot reallocate it later without triggering tax.
| Tax | When It Applies | Top Rate | Exemption (2025) |
|---|---|---|---|
| Estate Tax | Assets at death | 40% | $13,990,000 |
| Gift Tax | Lifetime transfers | 40% | $13,990,000 (shared) |
| GSTT | Transfers to skip persons | 40% | $13,990,000 (separate) |
The GST exemption is a third pool of exemption, tracked separately on Form 709. A transfer can owe estate or gift tax and GSTT at the same time.
⚠️ Important: This calculator provides a simplified estimate of federal GSTT only and ignores state-level generation-skipping rules, valuation discounts, and trust accounting for taxable distributions and terminations. GSTT planning is highly fact-specific - consult a qualified estate attorney or CPA before making transfers.