Frequently Asked Questions
Who is eligible for the Deceased Parent Generation Step-Up?
Applies to descendants of the transferor's parents (or spouse's parents) when the intermediate ancestor is deceased at the time of the transfer.
How does the Deceased Parent Generation Step-Up work?
If a beneficiary's parent (who is a descendant of the transferor's parent) is deceased at the time of the transfer, the beneficiary is moved up one generation, potentially avoiding GST tax by no longer being classified as a 'skip person'.
What law authorizes the Deceased Parent Generation Step-Up?
The Deceased Parent Generation Step-Up is authorized under IRC §2651(e) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §2651
Source: Internal Revenue Code, Title 26, United States Code
§ 2651. Generation assignment(a) In generalFor purposes of this chapter, the generation to which any person (other than the transferor) belongs shall be determined in accordance with the rules set forth in this section.
(b) Lineal descendants(1) In generalAn individual who is a lineal descendant of a grandparent of the transferor shall be assigned to that generation which results from comparing the number of generations between the grandparent and such individual with the number of generations between the grandparent and the transferor.
(2) On spouse’s sideAn individual who is a lineal descendant of a grandparent of a spouse (or former spouse) of the transferor (other than such spouse) shall be assigned to that generation which results from comparing the number of generations between such grandparent and such individual with the number of generations between such grandparent and such spouse.
(3) Treatment of legal adoptions, etc.For purposes of this subsection—(A) Legal adoptionsA relationship by legal adoption shall be treated as a relationship by blood.
(B) Relationships by half-bloodA relationship by the half-blood shall be treated as a relationship of the whole-blood.
(c) Marital relationship(1) Marriage to transferorAn individual who has been married at any time to the transferor shall be assigned to the transferor’s generation.
(2) Marriage to other lineal descendantsAn individual who has been married at any time to an individual described in subsection (b) shall be assigned to the generation of the individual so described.
(d) Persons who are not lineal descendantsAn individual who is not assigned to a generation by reason of the foregoing provisions of this section shall be assigned to a generation on the basis of the date of such individual’s birth with—(1) an individual born not more than 12½ years after the date of the birth of the transferor assigned to the transferor’s generation,
(2) an individual born more than 12½ years but not more than 37½ years after the date of the birth of the transferor assigned to the first generation younger than the transferor, and
(3) similar rules for a new generation every 25 years.
(e) Special rule for persons with a deceased parent(1) In generalFor purposes of determining whether any transfer is a generation-skipping transfer, if—(A) an individual is a descendant of a parent of the transferor (or the transferor’s spouse or former spouse), and
(B) such individual’s parent who is a lineal descendant of the parent of the transferor (or the transferor’s spouse or former spouse) is dead at the time the transfer (from which an interest of such individual is established or derived) is subject to a tax imposed by chapter 11 or 12 upon the transferor (and if there shall be more than 1 such time, then at the earliest such time),
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