IRS Form 706-GS(T) – In the complex world of estate planning and taxation, the generation-skipping transfer (GST) tax plays a crucial role in preventing tax avoidance across multiple generations. If you’re a trustee managing trusts that involve transfers to grandchildren or more distant relatives, you may encounter IRS Form 706-GS(T). This form is essential for reporting and paying taxes on certain trust terminations subject to the GST tax. In this comprehensive guide, we’ll break down everything you need to know about Form 706-GS(T), including its purpose, filing requirements, and key considerations for compliance. Whether you’re a trustee, estate planner, or beneficiary, understanding this form can help ensure smooth tax handling and avoid costly penalties.
What Is IRS Form 706-GS(T)?
IRS Form 706-GS(T), officially titled the Generation-Skipping Transfer Tax Return for Terminations, is a specialized tax form used to calculate and report the GST tax due on specific trust terminations. The GST tax is a federal tax imposed on asset transfers that “skip” a generation, such as from a grandparent to a grandchild, to discourage attempts to bypass estate or gift taxes on the intermediate generation.
A “taxable termination” occurs when a trust interest ends, and the assets are distributed to a skip person (someone two or more generations below the transferor) without passing through the intermediate generation. The form ensures that these transfers are taxed appropriately, even if no estate or gift tax applies at the parental level. The latest revision of the form, released in December 2025, applies to terminations occurring after December 31, 2024.
This form is distinct from related GST forms like Form 706-GS(D) for distributions to skip persons or Form 709 for lifetime gifts. It’s primarily for terminations where the trust ceases to exist or shifts assets in a way that triggers the tax.
Who Must File Form 706-GS(T)?
The responsibility for filing Form 706-GS(T) falls on the trustee of the trust experiencing the taxable termination. In general, any trustee overseeing a trust with a taxable termination must submit the form for the tax year in which the termination happened. This includes trustees of irrevocable trusts where assets are transferred to skip persons.
However, not every trust termination requires filing. The form is only necessary if the termination is taxable—meaning it exceeds the GST tax exemption (which aligns with the estate tax exemption, currently $13.99 million per individual in 2026, adjusted for inflation). If no tax is due but a termination occurred, filing may still be required to report the event, especially if GST exemption has been allocated. Executors or other responsible parties might also be involved if the trust is part of a larger estate.
If you’re unsure whether your trust qualifies, consult a tax professional, as misjudging this can lead to audits or penalties.
When and Where to File Form 706-GS(T)?
The due date for Form 706-GS(T) is typically the 15th day of the fourth month following the end of the trust’s taxable year in which the termination occurred. For trusts using a calendar year (the most common), this means April 15 of the following year. If the due date falls on a weekend or holiday, it shifts to the next business day.
Extensions are available by filing Form 7004 (Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns) on or before the original due date, which can provide up to six months extra time. For calendar-year filers, this extends the deadline to October 15.
Mail the form to the appropriate IRS center based on the type of filing:
- Original returns: Department of the Treasury, Internal Revenue Service Center, Kansas City, MO 64999.
- Supplemental or amended returns: Department of the Treasury, Internal Revenue Service, Stop 824G, 7940 Kentucky Drive, Florence, KY 41042-2915.
Private delivery services (like FedEx or UPS) can also be used, following IRS guidelines for approved carriers.
How to Complete IRS Form 706-GS(T)?
Filling out Form 706-GS(T) requires careful attention to detail. The form is divided into key parts:
- Part I: General Information – Include the trust’s name, EIN (Employer Identification Number), trustee’s details, and the tax year.
- Part II: Tax Computation – Calculate the GST tax based on the inclusion ratio and taxable amount.
- Schedule A: Taxable Terminations – List details of the terminations, including asset values, beneficiaries (with their generations relative to the transferor), and allocations of GST exemption.
To complete it:
- Gather required documents: Trust agreement, asset appraisals, beneficiary details (names, SSNs, relationships), prior gift or estate tax returns (like Form 709 or 706), and dates of terminations.
- Determine the fair market value of transferred assets at the termination date.
- Allocate GST exemption: Report how much exemption is applied to the transfer.
- Calculate the inclusion ratio (see below).
- Sign and date the form as the trustee.
The form includes sections for the transferor’s information (name, SSN/EIN) and trust specifics. If multiple terminations occur in one year, report them all on a single form. Always refer to the official instructions for line-by-line guidance.
Calculating the Generation-Skipping Transfer Tax
The GST tax rate is flat at 40% (as of 2026) on the taxable portion of the transfer. However, the key to computation is the inclusion ratio, which determines how much of the transfer is taxable:
- Inclusion Ratio = 1 – (GST Exemption Allocated / Value of Property Transferred)
- Round to the nearest one-thousandth (e.g., 0.001).
If the ratio is 0, the trust is fully exempt; if 1, it’s fully taxable; otherwise, it’s partially taxable. Multiply the taxable amount by the rate to find the tax due. Professional software or a tax advisor is recommended for accuracy, especially with complex trusts.
Penalties for Late Filing or Non-Compliance
Failing to file or pay on time can result in significant penalties under IRC Section 6651:
- Late Filing Penalty: Up to 5% per month (or fraction thereof) on the unpaid tax, capped at 25%.
- Late Payment Penalty: 0.5% per month on the unpaid amount, also capped at 25%.
- Combined, these can reach 47.5% over time unless reasonable cause is shown.
Additionally, understatement penalties under Section 6662 may apply at 20% for negligence or disregard of rules. Willful evasion can lead to higher fines or criminal charges. To avoid this, maintain organized records and file extensions if needed.
Related Forms and Resources
- Form 706: For estate taxes, including GST on direct skips.
- Form 7004: For extensions.
- Form 706-GS(D-1): Trustee notification of distributions to skip persons.
For the latest updates, visit the IRS website at www.irs.gov/Form706GST. Download the form and instructions directly from trusted sources like the provided PDF link: https://www.irs.gov/pub/irs-pdf/f706gst.pdf. Consult IRS Publication 559 (Survivors, Executors, and Administrators) for broader estate tax guidance.
Final Thoughts on Managing GST Tax with Form 706-GS(T)
Navigating IRS Form 706-GS(T) is a critical step in compliant estate planning for multi-generational wealth transfers. By understanding who must file, key deadlines, and calculation methods, trustees can minimize tax liabilities and avoid penalties. Always work with a qualified tax advisor or attorney to tailor strategies to your specific situation, as GST rules can be intricate and subject to change. Proper planning not only ensures compliance but also preserves more of your legacy for future generations. If you have questions about your trust, reach out to a professional today for personalized advice.