Using an irrevocable trust ensures a far smoother transition of assets than a will, and also offers significant tax savings and far more privacy, control and asset protection, begins the article “Dynasty Trusts: Best Way to Protect Family Wealth” from NewsMax.
Just as their name implies, a dynasty trust is king of all trust types. It gives the family the most benefits in all of these areas. Still not convinced? Here are a few reasons why the dynasty trust is the best estate planning strategy for families who want to preserve an estate across many generations.
Most trusts provide for the transfer of assets from one benefactor to the next generation, at most two or three generations. A dynasty trust can last for hundreds of years. This offers tax advantages that are far superior than others.
Under the new tax laws, an individual can gift or bequeath up to $11.4 million during their lifetime, tax free. After that limit, any further transfer of assets are subject to gift and estate taxes. That same transfer limit applies whether assets are left directly via a will or indirectly through a trust. However, in a direct transfer or trust, these assets may be subject to estate taxes multiple times.
If a grantor transfers assets into a dynasty trust, those assets become the property of the trust, not of the grantor or the grantor’s heirs. Because the trust is designed to last many generations, the estate tax is only assessed once, even if the trust gets to be worth many times more than the lifetime exclusion.
Not all states permit the use of dynasty trusts. However, five states do allow them, while six others allow trusts with lifespans of 360 years or more. An experienced estate planning attorney will know if your state permits dynasty trusts and will help you set one up in a state that does allow them, if yours does not. Nevada, Ohio and South Dakota provide especially strong asset protection for dynasty trusts.
Because dynasty trusts are passed down from generation to generation, trust assets are not subject to the generation-skipping transfer tax. This tax is notorious for complicating bequeathals to grandchildren and others, who are not immediate heirs.
When the dynasty trust is created, the grantor designates a trustee who will manage trust funds. Usually the trustee is a banker or wealth manager, not a trust beneficiary. The grantor can exert as much control as desired over the future of the trust, by giving specific instructions for distributions. The trustee may only give distributions for major life events, or each heir may have a lifetime limit on distributions.
With these kinds of safeguards in place, a benefactor can ensure that the family’s wealth extends to many generations. Speak with an estate planning attorney to learn about the laws concerning dynasty trusts in your state and see if your family can obtain the benefits it offers.
One of the main goals of our law practice is to help families like your plan for safe, problem free, and successful transfer of assets to the next generation. Call our office today to schedule a time for us to review your estate plan and identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: NewsMax (September 16, 2019) “Dynasty Trusts: Best Way to Protect Family Wealth”