Cannon Trust School Level II Practice Exam

The move tests generation-skipping transfers: transferring value to someone two or more generations younger than the transferor through a trust. Funding a trust for grandchildren directly involves giving property for the benefit of skip persons, so it is treated as a direct skip. It’s not about a later distribution or termination of a trust to skip beneficiaries (that would be taxable distribution or taxable termination) and it isn’t about a transfer to a non-skip beneficiary that eventually winds up skipping (that would be an indirect skip).