The GST is an additional transfer tax that applies when a transfer “skips” a generation. An example of when this might occur is when parents leave part of their estate to grandchildren. In the past, wealthy grandparents made use of trusts that left income and principal to their children for their lives. On the death of their children, the trust could leave income and principal to the grandchildren. On the death of the grandchildren, the principal could then be distributed to great grandchildren, avoiding Estate Taxes at the prior “skips” in generations. This allowed for the accumulation of wealth and appreciation of assets. Congress then added the GST to impose a transfer tax for individuals bypassing their children’s generation. The GST is in addition to the Estate Tax. Under current law, the GST Exemption is the same as the Federal Estate and Gift Tax Exemption. For example: if a $1,000,000 bequest was subject to both federal estate tax and the GST tax, the grandchildren would receive only $360,000