What is the purpose of allocating GST exemptions in trust planning?

• A. To minimize the tax impact on skip-generation transfers.
• B. To maximize immediate distributions to the settlor.
• C. To avoid taxes entirely for all time.
• D. To convert the trust to a charitable trust.

Answer: (A)

GST exemptions in trust planning shield transfers to skip generations from generation-skipping transfer tax. When assets are placed in a trust for grandchildren or other skip persons, allocating the GST exemption to that trust lets up to the exemption amount pass to those beneficiaries without GST tax. This helps preserve wealth for future generations by reducing the tax burden on intergenerational transfers. It isn’t about maximizing distributions to the settlor, nor about eliminating taxes entirely, and it doesn’t convert the trust to a charitable one.