The generation-skipping transfer (GST) tax is a federal tax on transfers to beneficiaries more than one generation below the transferor, intended to prevent skipping estate tax at intermediate generations. Taxpayers can allocate a lifetime GST exemption to shield transfers, often to dynasty trusts, so future appreciation passes free of GST tax.

Advisors coordinate GST exemption allocation with estate counsel when funding dynasty trusts. Theytrack inclusion ratios and educate families on distribution implications across generations.