2021 GST Exemption
For 2021, the GST Exemption figures are $11,700,000 (Lifetime GST exemption) and 40% (Top GST tax rate).
Effective 2021-01-01Source: 2021 Instructions for Form 709 (IRS)Verified 2026-09-03
Compared with 2020
| Item | 2020 | 2021 | Change |
|---|---|---|---|
| Lifetime GST exemption | $11,580,000 | $11,700,000 | +$120,000 (+1.0%) |
| Top GST tax rate | 40% | 40% | +0% (+0.0%) |
Who it applies to
Individuals who make gifts or other transfers subject to the federal generation-skipping transfer tax.
What changed this year, and why
For 2021, the lifetime generation-skipping transfer (GST) exemption is $11,700,000 per donor. This is the total amount a person may shield from the federal GST tax over the course of their lifetime. The exemption is allocated on Form 709 (United States Gift and Generation-Skipping Transfer Tax Return). Once allocated to a transfer, that portion of the exemption cannot be used again.
Common questions
- What is the GST tax and why does the exemption matter?
- The generation-skipping transfer (GST) tax applies when property is transferred to a beneficiary who is more than one generation below the transferor, such as a grandchild. The GST exemption allows a certain amount of such transfers to be shielded from this additional tax.
- Can I allocate my GST exemption during my lifetime?
- A donor may allocate any portion of the lifetime GST exemption to gifts or transfers reported on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
Which transfers the GST tax reaches
The GST tax on Form 709 applies only to inter vivos direct skips. A transfer qualifies as a direct skip when it meets three conditions at the same time: it must be subject to gift tax (meaning it is required to be listed on Schedule A), it must be a transfer of an interest in property, and it must be made to a skip person. All three conditions must be satisfied before the gift is treated as subject to the GST tax. If any one of the conditions is missing, the transfer is not a direct skip and no GST tax is imposed on it through this return. The instructions clarify that being "subject to the gift tax" means the gift has to be reportable on Schedule A of Form 709. When you make a transfer that meets all three conditions, it is the transfer on which you must report and pay any GST tax due. For 2021, the lifetime GST exemption available to offset that tax is $11,700,000.
Direct skip. The GST tax you must report on Form 709 is that imposed only on inter vivos direct skips. An inter vivos direct skip is a transfer that is: • Subject to the gift tax, • Of an interest in property, and • Made to a skip person. All three requirements must be met before the gift is subject to the GST tax.
2021 Instructions for Form 709 (IRS)
The exemption allocates itself to direct skips unless you elect out
For inter vivos direct skips - transfers made during the donor's life to a skip person - the IRS will automatically apply a portion of the donor's unused GST exemption to the property that was transferred. This automatic allocation happens unless the donor affirmatively chooses to prevent it. If you do not want the exemption to be used on a particular transfer, you must file Form 709 and attach a statement that clearly describes the transaction and states how much of the automatic allocation you are electing not to apply. Alternatively, reporting the direct skip on a timely filed Form 709 and paying the GST tax on that transfer will also block the automatic allocation. This rule gives donors flexibility: if you prefer to preserve your exemption for other transfers, you can opt out; if you want the exemption to shield the current transfer from GST tax, you can simply let the automatic allocation take effect.
In the case of inter vivos direct skips, a portion of the donor's unused exemption is automatically allocated to the transferred property unless the donor elects otherwise.
2021 Instructions for Form 709 (IRS)
Allocating the exemption is a one-way decision
Once you allocate GST exemption to a transfer, you cannot take it back. The allocation is permanent and binding, so you must decide carefully how much of your lifetime GST exemption to use and on which transfers. The donor may apply exemption to lifetime transfers by reporting them on Form 709, while the executor may apply exemption to transfers that take effect at death by reporting them on Form 706. Whichever form is used and whichever transfer is chosen, the decision to allocate exemption cannot be reversed in a later year. This one-way character makes it important to consider the overall plan for using the exemption, particularly when making gifts to skip persons or trusts that may benefit skip persons, since any exemption used now is no longer available to shelter future transfers.
An allocation is irrevocable.
2021 Instructions for Form 709 (IRS)
Allocating to a transfer not reported on this return
If you want to allocate GST exemption to a transfer that does not appear on the current Form 709 - for example, a transfer reported on a return filed for an earlier year - you must attach a separate statement to the return and title it "Notice of Allocation." The notice must identify the trust or other transfer clearly, including the trust's employer identification number if one is known. For a late allocation, the notice must also state the year the original transfer was reported on Form 709, give the value of the trust assets at the effective date of the allocation, and specify the amount of GST exemption being allocated to each gift (or explain that you are allocating exemption by a formula, such as an amount needed to produce an inclusion ratio of zero). This procedure allows donors to apply exemption to transfers after the fact, including those made in prior years for which no exemption was claimed at the time.
Notice of Allocation. You may wish to allocate GST exemption to transfers not reported on this return, such as a late allocation.
2021 Instructions for Form 709 (IRS)
A donor uses it during life, an executor uses it at death
Under federal estate and gift tax rules, the donor uses the GST exemption during life by reporting it on Form 709, while the executor uses it at death by reporting it on Form 706. The donor applies it to inter vivos transfers - that is, transfers made while still alive - whereas the executor applies it to property passing under a will or other testamentary arrangement. Whichever person makes the allocation cannot later change it; the allocation is irrevocable once filed. Because the lifetime GST exemption is $11,700,000 for 2021, a donor who files a timely Form 709 may designate some or all of that amount against transfers made to skip persons, and an executor settling an estate in 2021 may apply the exemption against transfers that take effect at death. A taxpayer planning gifts during life and a will at death must decide how to divide the exemption between the two, because once the choice is recorded on the return it cannot be undone.
The donor can apply this exemption to inter vivos transfers (that is, transfers made during the donor's life) on Form 709. The executor can apply the exemption on Form 706 to transfers taking effect at death. An allocation is irrevocable.
2021 Instructions for Form 709 (IRS)
A higher exemption in a later year does not reach back to cover an earlier transfer
For 2021, the lifetime generation-skipping transfer (GST) exemption is $11,700,000. Under the rule stated in the source, each annual increase in the exemption can only be allocated to transfers made, or appreciation occurring, during or after the year of the increase. This means a donor cannot use a higher exemption amount available in a later year to cover transfers made in an earlier year when the exemption was lower. The increased amount is available only for new transfers going forward, and for allocating to trusts that already exist but have not yet received additional transfers. For example, if in a prior year a donor made large generation-skipping transfers and used up all the exemption available at that time, the unused growth in the exemption that accumulated by 2021 cannot be allocated retroactively to those earlier transfers. The donor may use the full $11,700,000 against a transfer made in 2021, but the portion that represents the increase over prior years is lost for any transfers already completed before 2021.
In general, each annual increase can only be allocated to transfers made (or appreciation occurring) during or after the year of the increase.
2021 Instructions for Form 709 (IRS)
A gift under the annual exclusion is not automatically safe from GST tax
For 2021, the lifetime generation-skipping transfer (GST) exemption is $11,700,000. The source states that certain transfers, particularly transfers to a trust, may be subject to the GST tax at a later date even if the transfer is less than the $15,000 annual exclusion. This means that a gift that falls under the annual exclusion and is not subject to gift tax at the time it is made can still become subject to GST tax in the future if the trust from which distributions are made to skip persons does not have enough GST exemption allocated to it. A donor who makes such a transfer may want to apply GST exemption on Form 709 or on a Notice of Allocation to prevent future GST tax liability. However, the source also warns that a GST exemption may be automatically allocated to the gift if the trust that receives it is a "GST trust" as defined under the applicable provisions. The donor therefore needs to understand whether the automatic allocation rules apply and whether an affirmative election is needed to direct how the $11,700,000 exemption is used.
Certain transfers, particularly transfers to a trust, that are not subject to gift tax and are therefore not subject to the GST tax on Form 709 may be subject to the GST tax at a later date. This is true even if the transfer is less than the $15,000 annual exclusion.
2021 Instructions for Form 709 (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
2021 Instructions for Form 709 (IRS)
- Lifetime GST exemption
Every donor is allowed a lifetime GST exemption. The amount of the exemption for 2021 is $11,700,000.
- Top GST tax rate
The top rate for gifts and generation- skipping transfers remains at 40%.