You should consider a Dynasty Trust as part of your estate plan if you want to:
- provide for your children and their descendants by keeping your wealth in the bloodline
- protect assets for future generations from creditors and divorcing spouses
- save federal transfer taxes in subsequent generations
What is a Dynasty Trust?
A Dynasty Trust is an irrevocable trust often created inside your revocable trust. A revocable trust is the core document of a basic estate plan. Upon your death, your revocable trust becomes irrevocable. Your revocable trust then sets forth the distribution of your wealth upon your death. You have the option to leave your wealth to your children (or intended beneficiaries) outright or you have the option to leave it in separate trusts for your children’s lifetimes in Dynasty Trusts.
There are many reasons to continue the trust after your death. A Dynasty Trust can continue until all funds are distributed, until no descendants of the Grantor survive, or until the trust terminates by operation of state law (i.e, rule against perpetuities).
The fundamental benefit of the Dynasty Trust is that its assets continue to grow federal transfer tax free, and the longer the trust continues, the greater its benefits.
What are the Advantages?
- Provides investment management for your family
- Protects family members against outside influences, creditors and divorcing spouses
- Guarantees children’s or grandchildren’s inheritances (keeps your wealth in the bloodline)
- Provides flexibility since the child can act as his or her own trustee of the trust and thus can manage the investment of the trust assets
- Obtains very substantial tax benefits