March 17th, 2011

With the April 18 deadline for filing some 2010 Form 709 returns looming, estate tax attorneys have asked the Treasury Department to issue formal guidance that will clarify that there will be no automatic allocation of the generation-skipping transfer tax (GST tax) exemption where there can be no benefit.

The 2010 Tax Relief Act changed the GST tax rules, reinstating the GST tax, but assigning it a zero percent tax rate.

Transferors who make outright direct skips or direct skips to trusts that have no GST potential may not be aware of the automatic allocation issue, practitioners said. They may find themselves squandering their GST allocation by failing to elect out of automatic allocation.

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