The fine print says that when the people receiving the income from the trust are not self or spouse, the payments are subject to Gift Tax and Generation Skipping Tax when recipient is younger than 37.5 years old (regardless of if relative or not).
The Gift Tax Exemption increases with inflation, $1000 at a time. In 2024 it is $18K. Payments to individuals over this amount requires gift tax forms which effectively reduce your Federal Estate Tax Exemption. In a 20 year trust, $28K/yr payout could result in a $2MM reduction in estate tax exemption.
If recipient is under 37.5 yo GST can also be required. Exemption is again the Federal Estate Tax Exemption $13.61MM in 2024 (also rising with inflation until expiration of the Trump tax cut end of 2025).
If your recipients are subject to GST, do you pay both or does GST exempt you from Gift Tax. Both are reported on the same form.
Any experience with these out there?