Who is a skip-generation beneficiary?

Who is a skip-generation beneficiary?

• A. A skip-generation beneficiary is the settlor's spouse.
• B. A skip-generation beneficiary is someone two generations younger than the settlor, such as a grandchild.
• C. A skip-generation beneficiary is any charitable organization.
• D. A skip-generation beneficiary is a beneficiary who receives distributions only after a generation.

Answer: (B)

The idea being tested is the generational relationship of a beneficiary to the person who creates the trust. A skip-generation beneficiary is someone who is two generations younger than the settlor. In plain terms, that’s a grandchild: the grandparent is two generations older than the grandchild, so the wealth “skips” the child’s generation. For example, if a grandparent sets up a trust and names a grandchild as the beneficiary, bypassing the child, the grandchild is the skip-generation beneficiary. This designation focuses on who is related to the settlor, not on when distributions occur. The other options don’t fit because a spouse is not two generations younger than the settlor, a charitable organization isn’t a person two generations younger, and the idea of distributions after a generation describes timing rather than the required generational relationship.

The idea being tested is the generational relationship of a beneficiary to the person who creates the trust. A skip-generation beneficiary is someone who is two generations younger than the settlor. In plain terms, that’s a grandchild: the grandparent is two generations older than the grandchild, so the wealth “skips” the child’s generation.

For example, if a grandparent sets up a trust and names a grandchild as the beneficiary, bypassing the child, the grandchild is the skip-generation beneficiary. This designation focuses on who is related to the settlor, not on when distributions occur.

The other options don’t fit because a spouse is not two generations younger than the settlor, a charitable organization isn’t a person two generations younger, and the idea of distributions after a generation describes timing rather than the required generational relationship.