Legal Definitions - deemed transferor

A deemed transferor is a specific individual identified for tax purposes within a generation-skipping trust. This person holds an interest in the trust for a period, and their death is the event that triggers the assessment of the generation-skipping transfer tax (GSTT) on the trust assets passing to a younger generation. Essentially, the law "deems" this person to be the one transferring the assets, even if they didn't originally create the trust, to calculate the tax due when the assets skip a generation.

Here are some examples to illustrate this concept:

• Imagine a wealthy Aunt Sarah creates a trust. The trust states that her brother, John, will receive income from the trust for his entire life. After John passes away, the remaining trust assets are to be distributed to John's daughter, Emily (who is Aunt Sarah's grandniece). In this scenario, John is the deemed transferor. He is one generation below Aunt Sarah, but Emily is two generations below Aunt Sarah. When John dies, the trust assets pass to Emily, and John's death is the event that triggers the generation-skipping transfer tax on those assets.

• Consider Uncle Robert, who sets up a trust. His niece, Clara, is designated to receive income from the trust for her lifetime. Upon Clara's death, the trust assets are to be distributed to Clara's son, Leo (who is Uncle Robert's grandnephew). Here, Clara is the deemed transferor. She is one generation below Uncle Robert. Leo, however, is two generations below Uncle Robert. When Clara dies, the trust assets pass to Leo, and Clara's death is the event that causes the generation-skipping transfer tax to be calculated on those assets.

• Suppose Mr. Henderson establishes a trust. His stepdaughter, Maria, is to receive income from the trust for her life. After Maria's death, the trust assets are to be distributed to Maria's son, David (Mr. Henderson's step-grandson). In this situation, Maria is the deemed transferor. For generation-skipping transfer tax purposes, a stepchild is generally treated as one generation below the step-parent. David, as Maria's son, is two generations below Mr. Henderson. When Maria dies, the trust assets pass to David, and her death is the event that triggers the generation-skipping transfer tax.