Interested in training for your team? Click here to learn more

GST Inclusion Ratios and Applicable Fractions for Estate Planners: Rules, Exceptions and Tax Calculations

Recording of a 90-minute CLE/CPE webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, November 7, 2017

Recorded event now available

or call 1-800-926-7926

This CLE course will provide estate planning counsel and advisers with a thorough and practical exploration to the computation of the generation-skipping transfer tax inclusion ratio. Inadvertent seemed allocations can cause a Trust to stray from the ideal of an inclusion ratio of zero or one. Understanding the implications and potential solutions to mixed inclusion ratio trusts is critical to effective GST planning and rehabilitation of flawed planning.


Critical to successful multi-generational gift tax planning and compliance is a solid foundation in the GST tax regime of Section 2632 and following statutes. Beyond identifying skip-person transferees and gifts that will trigger GST tax, estate planners must have a detailed understanding of the “inclusion ratio” rules to calculate the tax cost of GSTs.

Section 2642 provides the framework for determining the taxable portion of any GST under GST tax. The inclusion ratio works with the “applicable fraction” to determine the tax rate of a GST. A trust with an inclusion ratio of 0 is exempt from GST tax, while a trust with a ratio of 1 is fully taxable.

The taxable portion of the trust is the applicable fraction to determine the property subject to the GST tax rules. The applicable fraction consists of the GST tax exemption over the property value, net of estate tax paid and any charitable deduction.

The inclusion ratio and applicable fraction formulas are used differently depending on the type of trust receiving a GST. There are special rules applicable to charitable lead annuity trusts, for example, that alter the tax cost of a GST. To avoid costly tax consequences, estate planning counsel and advisers need to be constantly aware of the impact of inclusion ratio rules on transfers subject to the GST rules.

Listen as our experienced panel provides a deep and practical guide to the calculations of inclusion ratios and applicable fractions under Section 2642.



  1. IRC 2642 structure
    1. Inclusion ratio defined
    2. Applicable fraction defined
    3. Treatment of inclusion ratios in severance of GST-impacted trust into two or more trusts
    4. Special rules for Charitable Lead Annuity Trusts
  2. Calculation of inclusion ratio
  3. Computation of applicable fraction
  4. Planning implication of pre-transfer inclusion ratio and fraction calculations
  5. Situations and subsequent transfers requiring recomputation of inclusion ratio and applicable fraction


The panel will discuss these and other important topics:

  • How to spot trusts with an inclusion ratio greater than zero
  • Proactively identifying valuation opportunities when calculating inclusion ratios
  • The inter-relation between inclusion ratio and applicable fraction under Section 2642 and its regulations
  • Special rules for CLATs and other types of trusts in calculation of inclusion ratio and imposition of GST tax
  • Regulatory guidance for calculating numerator and denominator of applicable fractions


Lawton, Celeste
Celeste C. Lawton

Norton Rose Fulbright US

Ms. Lawton's practice is focused on wealth transfer planning, assisting clients in all aspects of their estate...  |  Read More

Zeydel, Diana
Diana S.C. Zeydel

Greenberg Traurig

Ms. Zeydel is the National Chair of the firm’s Trusts and Estates practice, and she focuses on estate, trust and...  |  Read More

Montesano, Carmela
Carmela T. Montesano

Greenberg Traurig

Ms. Montesano is an estate planning attorney who concentrates her practice in all aspects of estate planning, including...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video