Legal Definitions - Skip person

A skip person is a legal term used in estate planning and tax law to identify a specific type of beneficiary who receives a gift or inheritance. This beneficiary is considered a skip person if they are at least two generations younger than the individual making the transfer of assets.

This concept is particularly relevant due to the generation-skipping transfer tax (GSTT), a federal tax designed to ensure that wealth transferred across multiple generations (e.g., from a grandparent directly to a grandchild, bypassing the child's generation) is taxed, preventing the avoidance of estate taxes that would normally apply if assets passed through each successive generation.

• Example 1: Grandparent's Direct Gift

  Imagine a grandmother, Mrs. Albright, decides to give a significant financial gift directly to her grandson, David, to help him purchase his first home. Mrs. Albright's son (David's father) is still alive and well.

  • How it illustrates the term: In this situation, David is a skip person because he is two generations younger than Mrs. Albright. Mrs. Albright is the first generation, her son is the second, and David is the third. By gifting directly to David, Mrs. Albright is "skipping" her son's generation for this particular transfer.

• Example 2: Great-Aunt's Bequest in a Will

  Consider Ms. Eleanor Vance, a great-aunt, who specifies in her will that a portion of her estate should be inherited directly by her great-niece, Chloe. Ms. Vance's niece (Chloe's mother) is also a beneficiary of other parts of the will.

  • How it illustrates the term: Chloe is a skip person relative to Ms. Vance. Ms. Vance represents the first generation, her niece (Chloe's mother) is the second, and Chloe is the third. The direct inheritance from Ms. Vance to Chloe bypasses the intervening generation of Ms. Vance's niece.

• Example 3: Trust Beneficiaries

  Suppose Mr. Chen establishes a trust that will provide income to his children during their lifetimes, but upon the death of the last surviving child, the remaining principal of the trust will be distributed equally among his grandchildren. Mr. Chen's children are still alive when the trust is created.

  • How it illustrates the term: For the ultimate distribution of the trust's principal, Mr. Chen's grandchildren are considered skip persons. They are two generations younger than Mr. Chen. Although his children receive income, the final transfer of the principal assets "skips" the children's generation, making the grandchildren skip persons in relation to that specific transfer of wealth.