Giovanni established an irrevocable life insurance trust in 2014 and funded it with a $1 million face value policy on his life. After his death, income of the trust is distributed at the discretion of the corporate trustee to Giovanni's wife and children. The trust is to terminate 25 years after Giovanni's death, when trust assets are to be distributed to Giovanni's grandchildren. Which one of the following is a correct statement about the application of the generation-skipping transfer tax (GSTT) to this trust? A)The GSTT will apply when a taxable termination occurs. B)The GSTT cannot apply to this trust since no skip parties were in existence when it was established. C)The GSTT will never apply to this trust because Giovanni did not assign any of his GSTT exemption. D)The GSTT will not be applicable to this trust since it violates the rule against perpetuities.
Giovanni established an irrevocable life insurance trust in 2014 and funded it with a $1 million face value policy on his life. After his death, income of the trust is distributed at the discretion of the corporate trustee to Giovanni's wife and children. The trust is to terminate 25 years after Giovanni's death, when trust assets are to be distributed to Giovanni's grandchildren. Which one of the following is a correct statement about the application of the generation-skipping transfer tax (GSTT) to this trust? A)The GSTT will apply when a taxable termination occurs. B)The GSTT cannot apply to this trust since no skip parties were in existence when it was established. C)The GSTT will never apply to this trust because Giovanni did not assign any of his GSTT exemption. D)The GSTT will not be applicable to this trust since it violates the rule against perpetuities.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Giovanni established an irrevocable life insurance trust in 2014 and funded it with a $1 million face value policy on his life. After his death, income of the trust is distributed at the discretion of the corporate trustee to Giovanni's wife and children. The trust is to terminate 25 years after Giovanni's death, when trust assets are to be distributed to Giovanni's grandchildren.
Which one of the following is a correct statement about the application of the generation-skipping transfer tax (GSTT) to this trust?
A)The GSTT will apply when a taxable termination occurs.
B)The GSTT cannot apply to this trust since no skip parties were in existence when it was established.
C)The GSTT will never apply to this trust because Giovanni did not assign any of his GSTT exemption.
D)The GSTT will not be applicable to this trust since it violates the rule against perpetuities.
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