What Is a Generation-Skipping Trust in Oklahoma? Advantages and Disadvantages Explained

When it comes to strategic estate planning in Oklahoma, especially for families with significant assets, one option worth considering is the Generation-Skipping Trust, often called a GST. This specialized trust allows grandparents or parents to transfer wealth directly to grandchildren—or even great-grandchildren—bypassing the children’s generation. While that might sound like disinheriting your kids, that’s not the goal. Instead, it’s a legal tool that can minimize estate taxes and preserve wealth across multiple generations.

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What Is a Generation-Skipping Trust in Oklahoma?

A Generation-Skipping Trust is an irrevocable trust that names a “skip person”—typically a grandchild or someone who is at least 37.5 years younger than the grantor—as the beneficiary. The trust assets are held and managed according to the terms of the trust, and then passed on to these skip persons, skipping over the grantor’s children for estate tax purposes.

This skipping mechanism can avoid one layer of estate tax that would otherwise be due if the assets were first transferred to the children and then from the children to the grandchildren.

Advantages of a GST In Estate Planning

1. Avoids Double Taxation
Normally, when assets pass from grandparents to children, and then from children to grandchildren, each transfer can trigger estate tax. A GST bypasses the children’s estates, allowing assets to grow and be transferred to the grandchildren with just one round of estate tax (and in some cases, none, if exemption limits are used properly).

2. Long-Term Wealth Preservation
By skipping a generation, more assets stay within the family line over time. This can be especially beneficial for families with large estates who want to create a long-lasting financial legacy.

3. Asset Protection
Assets held in a GST are generally protected from creditors, divorce settlements, and lawsuits, which can help protect the financial future of your grandchildren and beyond.

4. Flexibility Through Lifetime Use
The trust can be structured to allow your children to benefit from the assets during their lifetime (such as receiving income), while still preserving the principal for your grandchildren.

Disadvantages of an Oklahoma Generation-Skipping Trust

1. Complexity and Legal Costs
A GST requires careful drafting and strategic planning to comply with federal and state tax laws, particularly the Generation-Skipping Transfer Tax (GSTT). Professional legal and financial guidance is essential.

2. Use of GST Exemption
Each person has a GST tax exemption (currently over $13 million per individual in 2025), but you must allocate it properly. If you fail to do so, the trust could be subject to a flat 40% GST tax in addition to estate taxes.

3. Perceived Family Inequity
Some family members—particularly your children—may feel overlooked or treated unfairly if they are “skipped” in the inheritance process. This can cause tension or disputes if the planning isn’t communicated clearly.

4. Inflexibility
Because a generation-skipping trust is irrevocable, once it’s set up, it typically cannot be changed. That makes it crucial to plan carefully for contingencies and evolving family dynamics.

Is an Irrevocable Trust Right for You?

A generation-skipping trust can be a powerful estate planning tool for protecting family wealth, reducing taxes, and building a legacy. But it’s not suitable for everyone. It’s best used by families with substantial estates or those concerned about multi-generational estate tax exposure.

Contact a Will and Trust Attorneys You Can Count On

If you’re interested in learning whether a GST could benefit your family or you want to explore other estate planning strategies, contact the Tulsa, Oklahoma, Will and Trust attorneys at Kania Law Office at 918.743.2233. To ask an online legal question regarding estate planning, follow this link.