Legal Definitions - nonskip person

A nonskip person is a legal term used in U.S. tax law, specifically in the context of the Generation-Skipping Transfer (GST) Tax. This tax is designed to prevent individuals from avoiding estate and gift taxes by transferring significant wealth directly to beneficiaries who are two or more generations younger than themselves (such as grandchildren or great-grandchildren), thereby "skipping" an intermediate generation's tax liability.

Essentially, a nonskip person is anyone who is not considered a "skip person" for GST tax purposes. This typically includes individuals who are:

• In the same generation as the person making the transfer (e.g., a spouse or sibling).
• In an older generation than the person making the transfer (e.g., a parent).
• In the generation immediately younger than the person making the transfer (e.g., a child).
• Certain trusts or legal entities that are structured in a way that they are not treated as skip persons.

Transfers of assets to a nonskip person are generally not subject to the Generation-Skipping Transfer Tax.

Examples:

• Example 1: Inheritance to a Child
  Eleanor, a mother, drafts her will to leave her entire estate to her daughter, Maria. For the purposes of the Generation-Skipping Transfer Tax, Maria is considered a nonskip person because she is in the generation immediately younger than Eleanor. Therefore, this transfer of assets from Eleanor to Maria would not trigger the Generation-Skipping Transfer Tax.

• Example 2: Gift to a Sibling
  Robert makes a significant financial gift to his brother, Paul. In the context of the Generation-Skipping Transfer Tax, Paul is a nonskip person because he is in the same generation as Robert. This means the gift from Robert to Paul would not be subject to the Generation-Skipping Transfer Tax, although it might be subject to gift tax depending on the amount.

• Example 3: Trust Benefiting a Spouse
  Mr. Henderson establishes a trust that will provide income and eventually distribute its principal to his wife, Mrs. Henderson. Under the terms of the trust, Mrs. Henderson is the primary beneficiary. Because Mrs. Henderson is in the same generation as Mr. Henderson, she is considered a nonskip person. As long as the trust is structured to benefit only Mrs. Henderson (or other nonskip persons) during her lifetime, the assets transferred into this trust would generally not be subject to the Generation-Skipping Transfer Tax.