Q: Could my family benefit from a dynasty trust?
A: Dear Frugal:
A dynasty trust is a special type of trust that passes wealth for multiple generations in the most tax-efficient manner possible. By creating a dynasty trust, your assets will be available to your children, grandchildren, and other heirs, with minimal tax obligations—and if the trust is drafted properly, with maximum asset protection from creditors, lawsuits, and divorces.
Dynasty trusts are irrevocable, so you can’t change the terms once the trust goes into effect, as is possible with revocable trusts. And these trusts can, in some states, last forever.
But the primary appeal of dynasty trusts is that as long as the assets are held in the trust—and proper exemptions were applied at the time the assets were transferred to the trust—your beneficiaries will not have to pay estate taxes, gift taxes, or generation-skipping transfer taxes (GSTT), no matter how significantly the assets in the trust appreciate in value over the generations.
If you think a dynasty trust might be useful for your family’s assets, contact a Personal Family Lawyer®.