GST exemption is the lifetime amount a taxpayer may allocate to shield transfers to "skip persons"(e.g., grandchildren) from generation-skipping transfer tax. Allocations can be made on Form 709 or706 and, when effective, allow future appreciation on exempt property to avoid additional transfer tax. Using exemption with dynasty trusts enables multigenerational compounding outside beneficiaries' estates.

Advisors allocate GST exemption on 709s/706s when funding dynasty trusts. Ledgers track exempt versus nonexempt assets to avoid inadvertent taxable terminations letter.