Current law allows a married couple to transfer up to $10.24 million into a trust that is exempt from the federal generation-skipping transfer tax. The proposal would deny the GST exemption prospectively, unless the trust must terminate within one of three perpetuity periods: (1) 21 years after the death of a life in being; (2) 90 years after creation; or (3) after the death of the last living beneficiary who is no more than two generations younger than the settlor. Atrust now in existence would be allowed a grace period during which it could be modified to terminate within the allowed period, but absent modification, the trust would lose its GST exemption at the end of the grace period. The proposal is offered as a part of the Shelf Project, a collaboration of tax professionals to develop proposals raising revenue while making the tax system more efficient and reducing deadweight loss. The inventory of the prior 64 shelf projects is found at http://www.utexas.edu/ law/faculty/calvinjohnson/shelf_project_inventory _subject_matter.pdf. Shelf projects follow the format of a congressional taxwriting committee report in explaining current law, what is wrong with it, and how to fix it.


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