Technical article
United States: Gift Tax, Estate Tax and the Tax on Skipping a Generation, on a US$15 Million Trust
The United States has a gift tax, an estate tax and a tax on skipping a generation.
Imagine a married couple in Colorado who want to put US$15 million into a family trust for their children and grandchildren. Some grandchildren live abroad. The amount is an example, not a forecast. How big can the trust be before federal tax applies?
The 2026 figure is US$15,000,000 for each person. The couple are two people.
One allowance, three taxes
The United States has a gift tax, an estate tax and a tax on skipping a generation. Each has the same size of allowance in 2026: US$15,000,000 per person. It was US$13,990,000 in 2025. Congress set the 2026 figure in a law signed on July 4, 2025.
Gift and estate tax share one lifetime pot. A gift to a trust that uses up part of the allowance leaves less at death. The allowance for skipping a generation is a separate pot of the same size, and the person who gives the money assigns it to a trust, usually on Form 709. The assignment cannot be undone.
Above the allowance the top rate is 40%.
| Tax | Applies to | 2026 allowance | Rate above |
|---|---|---|---|
| Gift tax | Completed gifts, including gifts to a trust | US$15,000,000 per person | 40% |
| Estate tax | Property owned or controlled at death | US$15,000,000 per person | 40% |
| Generation-skipping tax | Payments to grandchildren and below, and trusts that end in their favor | US$15,000,000 per person | 40% times the share not covered |
A couple who both give have two allowances. Gifts between spouses are exempt if the receiving spouse is a US citizen. There is also a yearly exclusion of US$19,000 per person who receives a gift.
Who counts as skipping
A skip person is someone two or more generations below the person who gave the money. Grandchildren are the clearest case. A trust can also be a skip person if every interest in it is held by skip persons.
The rule is about generation. The statute text has no test of where the skip person lives. A US trust that pays a grandchild in Spain or Chile is therefore in the same position as one that pays a grandchild in Ohio. This is a reading of the statute text, because no IRS page says it in one sentence.
If the allowance for skipping is assigned to the trust and covers its full value, the share not covered is zero, and no skipping tax arises. The tax can arise when the trust pays a skip person, when a trust interest ends, and on a direct gift to a grandchild.
When a gift is complete
A gift counts only when the giver has let go of control. If the couple keep the power to take the property back, or to name new beneficiaries, the gift is incomplete and the property stays in their estate. The same happens when they keep the right to the income or the right to say who gets it. The estate tax then reaches the trust at death.
Putting it together
Take the US$15 million trust above, funded in full by gifts from the couple during life. With two allowances and no retained powers, the gift sits below the federal threshold. The couple report it on Form 709 and assign the skipping allowance to the trust.
A single person who funds a US$25 million trust would pass the allowance. Only the part above is taxed, at 40%.
You could
You could list your own total gifts so far and your likely estate, and set them next to the US$15,000,000 figure. You could ask whether each grandchild is a skip person under the rule above.
How would a trust of this size change your plans for the grandchildren? Tell us what you are thinking. Someone with a similar question may find it useful.
Figures are estimates for planning, based on public data. Date read: October 2026.
Sources
- IRS inflation adjustments for 2026 (A)
- IRS Rev. Proc. 2025-32 (A)
- IRS What's New estate and gift tax (A)
- Cornell LII 26 USC 2001, 2036, 2612, 2641 and 2663 (A)
- Cornell LII 26 CFR 25.2511-2 (A)
- PwC tax summaries United States (B)
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