What is the maximum lifetime exemption against Generation-Skipping Transfer Tax (GSTT)?

The correct answer is that the maximum lifetime exemption against the Generation-Skipping Transfer Tax (GSTT) is $11.7 million per individual as of 2021, which is indexed for inflation. However, since the current answer provided in the choices is $2 million, it is likely that this is a reference to an older exemption amount before updates were made to the tax code.

The Generation-Skipping Transfer Tax is a tax applied to transfers of property that skip a generation, such as gifts made directly to grandchildren. The exemption allows individuals to transfer a certain amount free from GSTT during their lifetime.

The $2 million figure was a previously applicable limit before the adjustments made in later tax reforms, which significantly increased the exemption amounts. Understanding the current limits is essential for estate planning as it impacts how much wealth can be transferred across generations without incurring the GSTT.

In the context of estate planning, being aware of the current exemption limits ensures that individuals can effectively structure their estate plans to minimize tax liabilities while maximizing the benefit to their heirs.