Form 706-GS (T) - Feb 2006

IRS Form 706-GS(T): Filing guide for taxable trust terminations

What is Form 706-GS(T)?

Form 706-GS(T) is the Generation-Skipping Transfer Tax Return for Terminations. Trustees use it to calculate and report the generation-skipping transfer (GST) tax that becomes due when a taxable termination happens inside a trust. It is one of several GST returns in the 706 series.

The GST tax is a separate federal tax on wealth that passes to someone two or more generations below the original transferor. Form 706-GS(T) covers only the termination trigger, not direct skips or trust distributions, which use different forms.

Who needs to file Form 706-GS(T)?

The duty to file falls on the trustee of a trust that has had a taxable termination during the calendar year. In practice, several types of people prepare or manage this return on a trust's behalf.

People who commonly deal with Form 706-GS(T) include:

• Trustees administering a family or dynasty trust when a beneficiary's interest ends
• Estate planning attorneys handling trust and GST compliance for clients
• CPAs and accountants preparing federal transfer tax returns
• Executors coordinating a decedent's estate with related trust events

If you are the trustee, the responsibility to file and to pay any tax from trust assets is yours, even when an advisor prepares the return for you.

What is a taxable termination?

A taxable termination is the event that triggers Form 706-GS(T). It is the conclusion of an interest in property held in trust, for example when a beneficiary dies, a set period lapses or a power is released. Terminations can occur by death, lapse of time, release of a power or other means.

• A termination is not taxable in either of these situations:
• Immediately after the termination, a non-skip person still holds an interest in the property
• At no time after the termination can a distribution be made from the trust to a skip person

When neither exception applies and the remaining interests belong to skip persons, GST tax is due and the trustee reports it on this form.

Who counts as a skip person?

A skip person is someone two or more generations below the transferor, most often a grandchild or great-grandchild. An unrelated individual more than 37.5 years younger than the transferor also counts. A trust can be a skip person too, when all of its interests are held by skip persons.

How the GST tax and exemption work

The GST tax is a flat 40% tax, matching the highest federal estate tax rate. It applies on top of any estate or gift tax, which is why unplanned skips can be so costly. The rate on a given termination is 40% multiplied by the trust's inclusion ratio.

Every person has a GST exemption that shelters transfers from the tax. For 2026 the exemption is $15 million per person, or $30 million for a married couple, a level made permanent by the One Big Beautiful Bill Act of 2025. Amounts covered by allocated exemption produce a zero inclusion ratio and no tax.

When to file Form 706-GS(T)

Timing follows a calendar-year rule tied to when the termination happened. Filing late can expose the trust to penalties and interest, so trustees should track the deadline closely.

Key filing points to remember:

• File by April 15 of the year following the calendar year in which the termination occurred.
• If that date is a Saturday, Sunday or legal holiday, file on the next business day.
• Request more time with Form 7004, which grants an automatic extension to file.

An extension of time to file does not extend the time to pay, so estimate and pay any tax due by the original deadline.

Common mistakes to avoid

Because the GST rules are technical, errors on Form 706-GS(T) are easy to make and expensive to fix. Reviewing a few recurring problems before filing can save the trust from penalties.

Watch for these frequent issues:

• Treating a termination as taxable when a non-skip person still holds an interest
• Miscalculating the inclusion ratio after additions have been made to the trust
• Overlooking the medical or educational exclusions that remove some terminations from tax
• Missing the April 15 deadline or assuming an extension also delays payment

When the facts are complex, confirming the correct treatment with a qualified estate or tax professional is worthwhile.

Need to file Form 706-GS(T)?

Our fillable Form 706-GS(T) template lets you complete, edit and download the Generation-Skipping Transfer Tax Return for Terminations in minutes, with your entries organized and ready to file. Try it today for free.