Without second generation planning, if you leave assets outright to your children and they preserve those assets during their lives, there may be estate taxes on those assets upon their deaths. Your estate may already have paid estate taxes on those same assets when you died. Thus, that is basically a "double estate tax" on the same assets. Under current law, with second generation planning you can shelter an aggregate amount of up to $13,990,000 (2025 amount) as of your date of death (or the date when you make a lifetime transfer to your children's Descendant's Trusts) from all future estate taxes that would otherwise be due upon the deaths of your children and grandchildren. This amount is called the "GST exemption," which is the exemption from the GST tax.

This estate tax avoidance extends to the initial $13,990,000 (2025 amount) plus whatever that amount grows to during the lives of your children. Upon a child's death, assuming proper allocation of your GST exemption and proper administration of the child's trust, the full amount remaining in the child's trust will be distributed, estate tax free, to new Descendant's Trusts for the child's children. This preserves the GST exemption so that, on each grandchild's death, the trust assets pass estate tax free to great-grandchildren. Thus, with second generation planning, each generation has use of the trust assets during life and, usually, control over the disposition of the trust assets at death (through exercise of the power of appointment), yet those assets are protected from creditors claims and spouses suing for a divorce, and pass estate tax free to the next generation (subject to the above limits).