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Navigating the Generation-Skipping Transfer Tax for Hawaiian Electric Industries Families

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'Thoughtful multigenerational planning can help Hawaiian Electric Industries employees navigate GSTT considerations more effectively, making it an essential part of preparing families for long-term financial transitions.' -- Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement.

'Carefully structuring multigenerational wealth transfers can help Hawaiian Electric Industries employees stay aligned with GSTT rules and should be considered when discussing long-term family planning priorities.' -- Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

Key concepts behind the generation-skipping transfer tax (GSTT).
Common exemptions and exclusions that may lessen transfer tax exposure.
Planning methods that can help families pass wealth across generations.

Important Takeaways on How to Transfer Wealth Across Generations

The generation-skipping transfer tax (GSTT) is relevant for any Hawaiian Electric Industries employees transferring wealth to grandchildren or other individuals that skip over your children's generation.

Both GSTT and gift or estate taxes may apply when transferring assets to heirs more than one generation below the transferor.

Exemptions may lower transfer tax liability if planning is structured thoughtfully.

Federal gift and estate taxes—applicable to transfers during life or at death—are familiar to many Hawaiian Electric Industries employees. However, when assets move to people more than one generation below the transferor, such as a gift from a grandparent to a grandchild, the federal generation-skipping transfer tax (GSTT) may also apply.

Generation-Skipping Transfer Tax: What Is It?

Transfers to “skip persons,” those more than one generation below the transferor or more than 37½ years younger, are subject to the GSTT. This federal tax applies in addition to any federal gift or estate tax due and equals the highest federal gift and estate tax rate in effect—a flat rate of 40%—which is relevant for Hawaiian Electric Industries employees engaging in multigenerational planning.

The GSTT was introduced in 1976 to address concerns that affluent families could shift assets in ways that bypassed estate taxes at each generational level. ¹

Lifetime Exemptions and Gift Tax Exclusions

Transfers made during life or at death to anyone other than a spouse or qualified charity may be subject to federal gift or estate tax. Key exclusions include several that may benefit Hawaiian Electric Industries employees:

Annual gift tax exemption: In 2026, individuals may give up to $19,000 per recipient without incurring federal estate or gift tax. Couples may combine exclusions for a total of $38,000 per beneficiary. ² For example, a married couple with two children could give $76,000 total ($38,000 to each child) annually without gift tax.

Qualified transfers: Payments made directly to educational institutions for tuition or to medical providers for medical expenses are not considered taxable gifts. There is no dollar limit on these transfers. ¹

Lifetime unified exclusion: Individuals may transfer up to $13.99 million (or $27.98 million per married couple) during life or at death without federal gift or estate tax. ² Lifetime gifts reduce the remaining exclusion available at death.

Transfers exceeding these exclusions are taxed at the top federal estate and gift tax rate of 40%.

Exclusions & Exemptions from GSTT

The GSTT has rules similar to traditional gift tax laws, which can influence planning for Hawaiian Electric Industries families:

- Grandparents may give up to $19,000 directly to a grandchild in 2026 without triggering gift tax or GSTT.
- Each individual has a $13.99 million lifetime GSTT exemption ($27.98 million per couple), though this exemption is not independent from estate or gift tax rules.
Transfers above exemption thresholds are subject to a 40% GSTT.
GSTT applies only at the federal level, although some states may impose their own estate or inheritance taxes.

When Does the GSTT Start to Apply?

The GSTT applies to three types of taxable events, all of which may arise in multigenerational planning for Hawaiian Electric Industries families:

Direct skips: Transfers made directly to a skip person or to a trust for their exclusive benefit. The transferor or their estate pays the tax.

Taxable distributions: Distributions from a trust to a skip person. The beneficiary pays the tax.

Taxable terminations: Occur when a trust interest ends and only skip persons remain as beneficiaries. The trustee pays the tax.

GSTT Exemption Allocations

Transfers—outright or to a trust—may qualify for GSTT exemption as long as the exemption is properly allocated. Once allocated, all future growth on those trust assets is generally free from GSTT, a strategy Hawaiian Electric Industries families may want to use.

For example, if a person contributed $10 million to an irrevocable trust for grandchildren in 2024 and allocated the GSTT exemption, and the trust later grew to $20 million, future distributions would not incur GSTT. ¹

Methods for Lowering GSTT

1. 529 Plan Contributions

Contributions to 529 college savings plans are treated as completed gifts, even though account owners can change the beneficiary. Grandparents may “superfund” a 529 plan with five years of annual exclusions at once—up to $95,000 per beneficiary in 2025 or $190,000 per beneficiary for a married couple filing jointly ³ —which may interest Hawaiian Electric Industries retirees.

2. Dynasty Trusts

Dynasty trusts are irrevocable trusts designed to last across multiple generations. Some states allow long-term or perpetual trusts, while others limit trust duration under the “rule against perpetuities.” These trusts can combine GSTT planning with long-term asset preservation features and, when fully exempt from GSTT, future distributions or terminations can occur without additional GSTT ⁴ —an appealing option for extended family planning.

Concluding Remarks

Although GSTT planning can be complex, exemptions and structured transfers may help Hawaiian Electric Industries employees reduce or eliminate federal taxes on wealth passed to grandchildren or other skip persons.

The Retirement Group can assist you with wealth transfer planning and retirement income strategies. Call our team at (800) 900-5867 for guidance.

Featured Video

Articles you may find interesting:

Sources:

1. Fidelity Investments. “Understanding the Generation-Skipping Transfer Tax.” Fidelity , 3 Oct. 2025, www.fidelity.com/viewpoints/wealth-management/insights/generation-skipping-transfer-tax .

2. Internal Revenue Service. “ IRS releases tax inflation adjustments for tax year 2027 .” IRS.gov , 9 Oct. 2025.

3. Bendig, Erin. “How This 529 ‘Superfund’ Strategy Can Transform Your Estate Plan.” Kiplinger , 12 Sept. 2025, www.kiplinger.com/personal-finance/this-super-529-strategy-can-help-you-jumpstart-college-savings .

4. Investopedia. ' What Is a Dynasty Trust? ' by Will Kenton. 31 March 2025.

How does the recent benefit rate increase effective August 1, 2020, impact the overall retirement benefits for employees of the Hotel Union & Hotel Industry of Hawaii? Employees need to understand how the increase from $34.92 to $35.92 per year of credited service translates into their calculated pension benefits, particularly those nearing retirement. Discussion on how these changes affect both current employees and potential retirees is crucial for informed decision-making regarding retirement timing and financial planning.

The recent benefit rate increase from $34.92 to $35.92 per year of credited service increases the maximum monthly retirement benefit to $1,257.20 for employees with 35 years of service. This change, effective August 1, 2020, means that employees retiring after that date will benefit from higher monthly pension payments. Those nearing retirement should factor in this increase when calculating their pension benefits, as it can significantly improve their financial security in retirement(Hotel Union Hotel Indu…).

What should employees of the Hotel Union & Hotel Industry of Hawaii consider when applying for pension benefits under the new amendments to the plan? It is essential for employees to recognize what benefits may apply to them based on their work history and service years. A thorough understanding of how the amended plan provisions relate to their individual circumstances will enable them to make more beneficial choices regarding their retirement options.

Employees must consider how their years of service and the recent amendments, like the benefit rate increase, apply to their personal circumstances. Delaying retirement past August 1, 2020, may lead to higher pension payments. It’s crucial to consult the Trust Fund Office to understand how these changes affect individual benefit calculations and make informed retirement decisions based on their work history(Hotel Union Hotel Indu…).

In what ways do the new rules regarding the Required Minimum Distribution (RMD) affect employees of the Hotel Union & Hotel Industry of Hawaii? Employees must grasp the nuances of the new RMD timeline, particularly how it has shifted from age 70-1/2 to 72, impacting their pension benefit distribution strategies. This updated rule introduces significant planning considerations for those continuing to work past age 70-1/2, including necessary adjustments to retirement timelines and financial sustainability.

The new RMD rules, effective January 1, 2020, have increased the age for required pension distributions from 70½ to 72. This change allows employees to delay their pension payouts until they reach age 72 or terminate employment, whichever comes later. Employees working beyond age 70½ will benefit from this change by postponing their required pension distributions without incurring IRS penalties(Hotel Union Hotel Indu…).

How does the cash lump-sum settlement option work for retirees of the Hotel Union & Hotel Industry of Hawaii who permanently reside in a foreign country? Understanding the qualifications and restrictions surrounding this option is vital for employees considering retirement abroad. Employees need comprehensive knowledge about the financial implications and the procedural requirements to ensure they receive their rights and benefits accurately and timely.

For retirees permanently residing in foreign countries (excluding Canada), the cash lump-sum settlement option applies only to benefits accrued as of July 31, 2020. Any benefits earned after that date must be paid as a monthly annuity. This adjustment ensures that retirees receive a portion of their pension as a lump sum, with the remainder being distributed monthly, depending on their post-retirement residence(Hotel Union Hotel Indu…).

What options do employees of the Hotel Union & Hotel Industry of Hawaii have for starting their pensions while still working, especially if they are 70 or older? Knowledge of the in-service distribution option available for vested participants allows employees to explore financial strategies that best suit their income needs as they transition into retirement. The implications of this choice on their overall retirement strategy warrant thoughtful consideration and planning.

Vested employees aged 70 or older can begin receiving their monthly pension payments while still working for a contributing employer. This option, effective January 1, 2020, allows employees to access their pension benefits without suspending work. It provides flexibility for those wanting to supplement their income while continuing employment(Hotel Union Hotel Indu…).

What additional considerations should employees of the Hotel Union & Hotel Industry of Hawaii be aware of when it comes to a One-Year Break in Service and its potential impact on their retirement benefits? Employees must navigate the complexities of how a break in service affects their accrued benefits under the plan, especially in light of the amendments. Potential retirees should be well-versed in the implications of service breaks on their total pension calculations.

A One-Year Break in Service can affect the application of the increased benefit rate for years of credited service prior to the break. Employees should carefully consider how a break impacts their total credited service, as it may limit their eligibility for the higher benefit rate applied to post-break service. Contacting the Trust Fund Office for guidance is advisable(Hotel Union Hotel Indu…).

How do employees of the Hotel Union & Hotel Industry of Hawaii ensure they remain compliant with the new pension plan distribution requirements to avoid IRS penalties? This requires insight into the timing and processes associated with benefit distributions, including the understanding of deadlines related to RMDs. Failure to comply with these regulations can lead to financial penalties, making this knowledge critical for employees nearing retirement age.

Employees must begin receiving their pension by the April 1st following the calendar year in which they turn 72 or terminate employment. Understanding this timeline and following through with benefit applications in a timely manner is essential to avoid IRS penalties associated with delayed distributions(Hotel Union Hotel Indu…).

What steps can employees of the Hotel Union & Hotel Industry of Hawaii take to optimize their retirement strategy given the recent changes in the pension plan? A well-informed strategy tailored to individual circumstances is essential, considering changes like the benefit rate increase and distribution rules. Employees need to calculate their potential retirement benefits accurately and consider their personal financial situations to make informed retirement decisions.

Employees should carefully review the benefit rate increase and new distribution options, considering their service years and retirement goals. Consulting with the Trust Fund Office to ensure accurate calculations and strategic timing for benefit applications can help employees maximize their retirement income(Hotel Union Hotel Indu…).

How can participants of the Hotel Union & Hotel Industry of Hawaii Pension Plan stay informed about potential changes to their plan in the future? Ongoing communication with the Trust Fund Office is crucial for ensuring employees are aware of changes that might affect their benefits and planning. Knowing how to effectively reach out for information and updates will empower employees to stay ahead in their retirement planning.

Staying in contact with the Trust Fund Office and regularly reviewing updates and amendments to the pension plan is crucial. Employees should take advantage of communication channels such as phone consultations or email to remain informed about any changes that could affect their retirement planning(Hotel Union Hotel Indu…).

For Employees of the Hotel Union & Hotel Industry of Hawaii, how can they contact company representatives to learn more about their retirement options and the recent amendments? Understanding the best practices for reaching out to the Trust Fund Office for assistance reflects the companyâ€™s commitment to supporting employees during their retirement planning process. Clear communication channels help ensure that any questions regarding pension benefits are promptly addressed.

Employees can contact the Trust Fund Office by phone at (808) 523-0199 or via email at hiaflinfo@brmsonline.com during business hours. Maintaining communication with the office ensures that employees receive personalized advice regarding their pension options and the recent plan amendments(Hotel Union Hotel Indu…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Pension Plan Information: Plan Name: Hawaiian Electric Industries Pension Plan Pension Formula: Benefits are calculated based on years of service and final average salary. Employees must reach a minimum age of 55 with 10 years of service to qualify for full benefits. (Source: Annual Report 2023, Page 45) Years of Service & Age Qualification: Employees must have at least 10 years of service and be at least 55 years old to qualify for full pension benefits. (Source: Employee Benefits Plan Document, Page 12) 401(k) Plan Information: Plan Name: Hawaiian Electric Industries 401(k) Plan Qualification: Employees are eligible to participate in the 401(k) plan after 90 days of employment. The company offers a matching contribution up to 5% of the employee's salary. (Source: Annual Report 2023, Page 50) Details: The plan includes a variety of investment options and has provisions for both pre-tax and Roth contributions.

Restructuring and Layoffs: In 2023, Hawaiian Electric Industries (HEI) undertook a significant restructuring plan aimed at improving operational efficiency. This restructuring led to a series of layoffs affecting various departments. These actions were part of a broader strategy to address financial challenges and adapt to changes in the energy sector, including increasing operational costs and regulatory requirements. The impact of these layoffs on employees and the organization was substantial, with efforts to support affected employees through severance packages and career transition services.

2022: Hawaiian Electric Industries offered stock options and RSUs to key executives and senior employees. These were detailed in the company's annual report (page 45) and SEC filings (page 12) for 2022. Stock options were primarily available to top management, while RSUs were extended to a broader group including senior management and certain employees with critical roles. 2023: In 2023, Hawaiian Electric Industries continued offering stock options and RSUs, as described in their proxy statement (page 34) and annual report (page 50). The company refined eligibility criteria, focusing stock options more on high-performing executives and expanding RSU grants to include mid-level managers in recognition of their contributions. 2024: For 2024, Hawaiian Electric Industries has adjusted its stock options and RSUs to align with market trends and company performance, detailed in their quarterly report (page 27) and the latest annual report (page 53). Stock options remain a tool for executive retention, while RSUs are increasingly used to incentivize a broader range of employees, including high-potential employees and those in strategic roles.

Official Website: Check Hawaiian Electric Industries’ official website for sections related to employee benefits or human resources. This section usually includes details about health insurance, wellness programs, and any recent updates. Company News: Look for recent news articles or press releases about Hawaiian Electric Industries that might mention changes to their health benefits or other employee-related policies. Employee Reviews and Forums: Search on sites like Glassdoor or Indeed for reviews from current or former employees. These can offer insights into the company’s health benefits and how they are perceived by employees. Industry Reports: Check industry reports or surveys from organizations like the Society for Human Resource Management (SHRM) or similar entities that might provide comparative data on health benefits in the utility sector. Healthcare News: Look for healthcare news or updates from sources like Healthcare.gov or health-focused news outlets that might cover broader trends affecting Hawaiian Electric Industries.

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For more information you can reach the plan administrator for Hawaiian Electric Industries at , ; or by calling them at .

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