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Simple English definitions for legal terms
direct skip
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A quick definition of direct skip:
Term: DIRECT SKIP
Definition: Direct skip is when someone transfers their assets to a person who is two or more generations younger than them, either directly or through a trust. This transfer may be subject to a tax called the generation-skipping transfer tax, which is either a gift tax or an estate tax. It's important to know that this tax only applies to very large transfers of wealth.
Related Terms: Generation-skipping transfer, Generation-skipping transfer tax, Skip person
A more thorough explanation:
Definition: Direct skip is a type of transfer of assets that skips a generation and goes directly to the next generation, either through a trust or directly. This transfer may be subject to a generation-skipping transfer tax, which can be either a gift tax or an estate tax.
Example: John wants to leave his estate to his grandchildren instead of his children. He sets up a trust that will transfer his assets directly to his grandchildren, skipping his children. This is an example of a direct skip.
Explanation: In this example, John's assets are transferred directly to his grandchildren, skipping his children. This type of transfer is subject to a generation-skipping transfer tax, which is a tax on the transfer of assets to a person who is two or more generations below the transferor. In this case, John's children are one generation below him, and his grandchildren are two generations below him, so the transfer is subject to the tax.