Generation-Skipping Transfer (GST) Tax in 2026: $15M Exemption & How It Works
The generation-skipping transfer (GST) tax is a separate federal tax on wealth that passes to a “skip person” — typically a grandchild or someone more than one generation below you. In 2026 the GST exemption is $15 million per person (made permanent by OBBBA 2025), and the rate is a flat 40%. This guide explains how the GST tax works and why it matters for grandparent-to-grandchild transfers and dynasty trusts.
What the GST tax is
The GST tax is a flat 40% federal tax on transfers to a skip person, charged in addition to the regular estate or gift tax. Congress created it to close the loophole where a grandparent could pass wealth directly to a grandchild and skip an entire layer of estate tax. For 2026 the GST exemption is unified with the estate and gift tax at $15 million per person.
Who is a skip person
A skip person is someone two or more generations below the transferor — usually a grandchild or grandnephew — or an unrelated person more than 37.5 years younger. If the middle-generation parent is already deceased, the grandchild “moves up” and is no longer a skip person, so the GST tax does not apply to that transfer.
The three triggers
A GST tax event occurs in three ways: a direct skip (an outright gift or bequest to a skip person, such as a grandchild — paid by the transferor); a taxable termination (a trust interest ends with only skip persons remaining — paid by the trustee); and a taxable distribution (a discretionary trust pays out to a skip person — paid by the recipient).
Exemption and how it is allocated
The 2026 GST exemption is $15 million per individual ($30 million for a married couple). It is allocated on Form 709 (the gift tax return) when you make taxable gifts. Allocation can be automatic or explicit (“electing out”). Because automatic allocation can be costly for appreciated assets, many advisors make deliberate allocations. Small annual-exclusion gifts to skip persons can use GST exemption unless allocated away.
Estimate combined exposure with our Estate Tax Simulator.
Why it matters for planning
A direct skip stacked on top of the estate tax can reach 64% — 40% estate/gift tax plus 40% of the remaining 60%. Dynasty trusts can hold GST-exempt assets that grow outside the transfer-tax system for generations. These are advanced structures; confirm them with a licensed estate attorney.