What Is a Generation-Skipping Trust?

For families thinking about wealth that will last well beyond the next generation, a generation-skipping trust is a planning tool worth understanding. As the name suggests, it is designed to move assets to grandchildren or even later generations, and it interacts with a specialized federal tax that catches many people by surprise. This topic is part of Washington wills and trusts.

The Basic Concept

A generation-skipping trust is a trust structured so that assets ultimately benefit someone two or more generations below you, most commonly your grandchildren, rather than passing first to your children and then, on their deaths, to their children. The idea is to let wealth move further down the family tree in a coordinated, controlled way. Often the trust can still provide benefits to the intermediate generation, such as income or limited access for your children, while preserving the bulk of the assets for the grandchildren who are the eventual beneficiaries. Related guides cover WA Estate Tax Changes 2026 and How Do I Choose a Trustee?.

Families choose this approach for a few reasons. Some want to provide for grandchildren directly, perhaps because the children are already financially secure. Others want to keep assets protected within a trust structure across generations, shielding them from being fully exposed to a beneficiary's creditors, divorces, or spending habits. And in larger estates, skipping a generation can be part of a strategy to reduce the total transfer tax paid as wealth passes down the line, though that is precisely where a special federal tax comes into play.

Why the Federal GST Tax Exists

If moving assets straight to grandchildren simply avoided a layer of tax, everyone with substantial wealth would do it, and the government would collect far less over time. To prevent exactly that, federal law imposes a generation-skipping transfer tax, usually shortened to GST tax. The GST tax is a federal concept, layered on top of the federal estate and gift tax system, and it is aimed at transfers that skip a generation, whether outright or through a trust. Its purpose is to make sure that wealth passing to grandchildren and beyond does not escape transfer taxation just because it bypassed the children's generation.

The GST tax has its own exemption amount and its own set of rules, and it can apply in addition to the regular federal estate and gift taxes. Because it is a federal tax, it operates independently from Washington's state estate tax, and the two systems have different thresholds and mechanics. This is one of the more technical corners of tax law, and the details, including the exemption figures, change over time. The important point for most families is simply to know that the GST tax exists, that it can apply to generation-skipping arrangements, and that planning around it requires professional guidance. This article describes the tax in general terms and is not tax advice.

Washington Trust Law Governs the Trust Itself

While the GST tax is a federal matter, the trust you create to accomplish generation-skipping goals is still a creature of state law. In Washington, trusts are governed by chapter 11.98 RCW, which sets out many of the rules for how trusts operate, how trustees may act, and how the interests of beneficiaries are protected. For example, that chapter includes provisions addressing the powers of a trustee who is also a beneficiary, reflecting the care the law takes when someone wears two hats in a trust arrangement. When your attorney drafts a generation-skipping trust for a Washington family, the document is built to function within this state framework even as it is designed with the federal GST tax firmly in mind.

That combination is exactly why these trusts call for coordinated planning. The structure has to satisfy Washington trust law so that it works as intended for your family, and it has to be drafted with an eye on the federal GST rules so that it does not produce an unexpected tax result. Getting one side right while overlooking the other can undermine the whole plan.

When a Generation-Skipping Trust Makes Sense

Generation-skipping trusts are most useful for families with enough wealth that transfer taxes and multigenerational planning are genuine concerns, and for those who have a clear intention to benefit grandchildren or later generations directly. They are not necessary for every family, and they add complexity in exchange for their advantages, including ongoing trust administration and careful attention to the GST rules. For the right family, though, they can be a durable way to pass values and resources down more than one generation while keeping assets protected inside a trust.

Because both the federal tax landscape and your family's circumstances can shift, a generation-skipping trust should be created and reviewed with qualified legal and tax professionals. They can help you weigh whether the structure fits your goals, confirm the current exemption figures, and make sure the trust is drafted to work under both Washington law and federal tax rules. Please treat this article as general background and consult a qualified attorney or tax professional before acting.

A Local Note for Snohomish County Families

For families in Snohomish County who are thinking generations ahead, a generation-skipping trust offers a way to provide for grandchildren while keeping wealth organized and protected. The key is understanding that two systems are in play at once. Washington trust law under chapter 11.98 RCW shapes how the trust functions, and the federal GST tax shapes the tax consequences of skipping a generation.

If you are curious whether a generation-skipping trust could serve your family's long-term goals, the Law Office of Chad Foster can help you explore the idea and coordinate with your tax advisors to build a plan that fits. Reach out whenever you are ready to look ahead together.

This article is for general informational purposes only and is not legal or tax advice. For guidance on your specific situation, please consult a qualified attorney or tax professional.