Taxation of Estates and Gifts

Direct Skip

A direct skip is a transfer subject to a gift or estate tax that is made to a skip person.

  • This includes distributions from revocable trusts where the settlor has to include them as gifts.
Direct Skip Nontaxable Gift

A transfer excluded from gift tax by the annual exclusion amount or by medical/education exclusions is also excluded from the GST tax. 26 U.S.C. § 2642(c).

DSNG Separate Share Rule

A transfer to trust does not qualify as a DSNG however unless it is distributable only to that individual during his life and the trust assets will be includable in that individual's federal gross estate if he dies before the trust terminates. 26 U.S.C. § 2542(c)(2)(A)–(B).

Just because a transfer to trust is eligible for for the annual exclusion amount does not mean that it is a DSNG.