A generation-skipping trust (GST) helps you transfer wealth to your grandchildren or future generations while limiting tax exposure. In Arkansas, GSTs follow both state trust laws and federal tax rules. Understanding how these trusts work can help you make smarter choices when planning your estate.
Understanding generation-skipping transfers
A generation-skipping transfer happens when you pass assets to someone at least two generations younger than you, usually your grandchildren. If you use a GST, the assets in that trust avoid estate taxes at your children’s level. This helps you preserve more of your wealth for future generations.
How GSTs are taxed under federal law
The federal government applies a separate tax called the Generation-Skipping Transfer Tax (GSTT). It works alongside estate and gift taxes. Each person gets a GST exemption amount, which adjusts for inflation. For 2025, that exemption is over $13 million. If you set up a GST and stay under this limit, your transfer won’t face extra taxes.
Arkansas-specific trust rules to know
Arkansas law recognizes and supports long-term trusts like GSTs. The state adopted the Uniform Trust Code, which gives flexibility in how you manage and control a trust. You can choose whether the trust distributes income regularly or lets it grow. Arkansas does not have a separate estate tax, so GSTs focus more on federal tax savings.
Key reasons to consider a GST in Arkansas
If you want to keep family wealth protected over several generations, a GST makes that possible. It can shield assets from creditors and reduce tax liability. These trusts are especially helpful if you have significant savings, real estate, or a family business. You stay in control by setting the trust terms and deciding how and when your heirs receive their share.
Generation-skipping trusts can help you pass down wealth more efficiently. In Arkansas, the lack of a state estate tax and strong trust laws make these tools even more effective. Clear planning now can help your family keep more of what you’ve worked hard to build.