While the generation-skipping transfer (GST) tax is complex, most estate practitioners who regularly deal with it eventually obtain a level of comfort, if not an expertise, concerning it. Such practitioners counsel their clients about avoiding or minimizing exposure to the tax. Some of the typical tools in the arsenal involve the GST tax annual exclusion and the GST tax lifetime exemption. For the old trusts, the issue becomes whether the trust is “grandfathered” from the tax.

These tools are taught in any basic course about the GST tax. But there is another exemption from the GST tax, one that is often not mentioned, of which some practitioners might not be aware: the Gallo exemption. While the scope of the Gallo exemption is narrow, some of those trusts to which it applies are still in existence. The practitioner should realize that certain modifications of a Gallo exempt trust, including, for example, modifications via a decanting or court proceeding, could inadvertently trigger a GST tax.