In 2003,Otto dies leaving an after-tax estate of $2,000,000.Under the terms of Otto's will,this amount is placed in trust,life estate to Joyce (Otto's daughter),remainder to Sylvan (Otto's grandson).The executor of Otto's estate elects to use the $1,000,000 exemption (the maximum available in 2003)for generation skipping transfer tax (GSTT)purposes.Joyce dies in 2008 when the trust is worth $3,000,000.One result of these transactions is:

Question

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One-half of the trust ($1,000,000/$2,000,000)is insulated by the election of the $1,000,000 exemption.This leaves $1,500,000 [$3,000,000 (amount of trust)- $1,500,000 (attributable to exemption amount)] subject to the GSTT.

In 2003,Otto Dies Leaving an After-Tax Estate of $2,000,000