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Year of transfer GST exemption 1999 $1,010,000 2000 $1,030,000 2001 $1,060,000 2002 $1,100,000 2003 $1,120,000 2004 and 2005 $1,500,000 2006, 2007, and 2008 $2,000,000 2009 $3,500,000 2010 and 2011 $5,000,000 2012 $5,120,000 2013 $5,250,000 2014 $5,340,000 2015 $5,430,000 2016 $5,450,000 2017 $5,490,000 2018 $11,180,000 2019 $11,400,000 2020 $11,580,000 2021 $11,700,000 2022 $12,060,000 The amount of each increase can only be allocated to transfers made (or appreciation that occurred) during or after the year of the increase. The following example shows the application of this rule. Example. In 2003, Alex made a direct skip of $1,120,000 and applied the full $1,120,000 of GST exemption to the transfer. Alex made a $450,000 taxable direct skip in 2004 and another of $90,000 in 2006. For 2004, Alex can only apply $380,000 of exemption ($380,000 inflation adjustment from 2004) to the $450,000 transfer in 2004. For 2006, Alex can apply $90,000 of exemption to the 2006 transfer, but nothing to the transfer made in 2004. At the end of 2006, Alex would have $410,000 of unused exemption that can apply to future transfers (or appreciation) starting in 2007. Special QTIP election. In the case of property for which a marital deduction is allowed to the decedent's estate under section 2056(b)(7) (QTIP election), section 2652(a)(3) allows you to treat such property for purposes of the GST tax as if the election to be treated as qualified terminable interest property had not been made. The section 2652(a)(3) election must include the value of all property in the trust for which a QTIP election was allowed under section 2056(b)(7). If a section 2652(a)(3) election is made, then the decedent will, for GST tax purposes, be treated as the transferor of all the property in the trust for which a marital deduction was allowed to the decedent's estate under section 2056(b)(7). In this case, the executor of the decedent's estate may allocate part or all of the decedent's GST exemption to the property. You make the election simply by listing qualifying property on line 9 of Part 1. Line 2. These allocations will have been made either on Forms 709 filed by the decedent or on Notices of Allocation made by the decedent for inter vivos transfers that were not direct skips but to which the decedent allocated the GST exemption. These allocations by the decedent are irrevocable. Also include on this line allocations deemed to have been made by the decedent under the rules of section 2632. Unless the decedent elected out of the deemed allocation rules, allocations are deemed to have been made in the following order. 1. To inter vivos direct skips. 2. Beginning with transfers made after December 31, 2000, to lifetime transfers to certain trusts, by the decedent, that constituted indirect skips that were subject to the gift tax. For more information, see section 2632 and related regulations. Line 3. Make an entry on this line if you are filing Form(s) 709 for the decedent and wish to allocate any exemption. Lines 4, 5, and 6. These lines represent your allocation of the GST exemption to direct skips made by reason of the decedent's death. Complete Parts 2 and 3 and Schedule R-1 before completing these lines. Line 9. Line 9 is used to allocate the remaining unused GST exemption (from line 8) and to help you figure the trust's inclusion ratio. Line 9 is a Notice of Allocation for allocating the GST exemption to trusts as to which the decedent is the transferor and from which a generation-skipping transfer could occur after the decedent's death. If line 9 is not completed, the deemed allocation at death rules will apply to allocate the decedent's remaining unused GST exemption. The exemption will first be allocated to property that is the subject of a direct skip occurring at the decedent's death, and then to trusts as to which the decedent is the transferor. To avoid the application of the deemed allocation rules, you should enter on line 9 every trust (except certain trusts entered on Schedule R-1, as described later) to which you wish to allocate any part of the decedent's GST exemption. Unless you enter a trust on line 9, the unused GST exemption will be allocated to it under the deemed allocation rules. If a trust is entered on Schedule R-1, the amount you entered on line 4 of Schedule R-1 serves as a Notice of Allocation and you need not enter the trust on line 9 unless you wish to allocate more than the Schedule R-1, line 4, amount to the trust. However, you must enter the trust on line 9 if you wish to allocate any of the unused GST exemption amount to it. Such an additional allocation would not ordinarily be appropriate in the case of a trust entered on Schedule R-1 when the trust property passes outright (rather than to another trust) at the decedent's death. However, where section 2032A property is involved, it may be appropriate to allocate additional exemption amounts to the property. See the instructions for line 10, later. To avoid application of the deemed allocation rules, Form 706 and Schedule R should be filed to allocate the exemption to trusts that may later have taxable terminations or distributions under section 2612 even if the form is not required to be filed to report estate or GST tax. Line 9, column C. Enter the GST exemption, included on lines 2 through 6 of Part 1 of Schedule R (discussed above), that was allocated to the trust. Line 9, column D. Allocate the amount on line 8 of Part 1 of Schedule R in line 9, column D. This amount may be allocated to transfers into trusts that are not otherwise reported on Form 706. For example, the line 8 amount may be allocated to an inter vivos trust established by the decedent during the decedent’s lifetime and not included in the gross estate. This allocation is made by identifying the trust on line 9 and making an allocation to it using column D. CAUTION ! Instructions for Form 706 (Rev. 09-2022) -49-