What you need to know about the grandparent tax
Leaving lots of money to grandchildren, and skipping the generation in between, used to be a nifty way to beat the federal estate tax. That way, the money was subject to estate tax just once, when the grandparent left it to the grandchild. Otherwise, it would have been taxed when the grandparent left it to his child, and then again if that child preserved the money to pass along to his own children. Eventually, Uncle Sam realized he was being deprived of his second bite of the estate tax apple.
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