Taxable Termination

The GST tax is imposed upon a taxable termination of a beneficiary's interest in trust property as a result of death, lapse of time, or otherwise. A taxable termination will not be deemed to occur if:

• Immediately after the termination, a non-skip person has an interest in the property; or
• No distribution may be made after the termination from the trust to a skip person.

For example, if P creates a trust, which provides that the income is to go to P's child, and upon the child's death, the principal is to go to P's grandchildren, there would be a taxable termination upon the child's death. When the GST results from a taxable termination, the taxable amount is the value of the property for which the termination has occurred, less applicable expenses and debts.

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