GST applies when transfers are made directly to members of younger generations (effectively "skipping" a generation), when distributions are made from trusts to members of younger generations and when an interest in property of an older generation terminates in favor of a younger generation. The most common instance involving GST is where a grandparent leaves an inheritance directly to a grandchild and the grandparent is still living. However, the parties do not need to be related for there to exist a GST liability. If the beneficiary of the gift or estate is 37.5 years younger than the donor (or deceased) the transfer may be subject to GST. The exemption amount is, and will be the same as the estate tax and gift tax exemption amounts for 2011 through 2012 (5 million with a taxation rate of 35%).

In 2013, the exemption amount will be reduced to 1 million with a taxation rate of 55 percent as it will with the estate and gift tax exemptions.