Loune-Djenia Askew, Esq.
Oct 16, 2024
A Dynasty Trust avoids this by being structured as a perpetual trust, meaning it can continue for generations, preserving wealth within the family indefinitely.
A Dynasty Trust is unique because it can last forever, unlike most trusts, which are temporary. Typically, trusts end after a few generations due to the “Rule Against Perpetuities,” which prevents them from being permanent. When a temporary trust ends, its assets are distributed to beneficiaries, potentially leading to issues like creditor claims or misuse of the funds. A Dynasty Trust avoids this by being structured as a perpetual trust, meaning it can continue for generations, preserving wealth within the family indefinitely.
What Are the Advantages of a Dynasty Trust?
1. Protection from Creditors
A Dynasty Trust shields assets from creditors by keeping ownership within the trust itself. Since the beneficiary doesn't directly own the assets, they are protected from potential claims. This makes it especially effective in situations like divorce or lawsuits.
2. Protection of Family Values
Dynasty Trusts can also promote family values by including incentives for beneficiaries to remain productive and avoid the pitfalls of “trust fund syndrome,” where beneficiaries rely solely on inherited wealth without contributing to society.
3. Protection from Taxes
When properly designed, Dynasty Trusts can avoid estate taxes on the assets held within the trust for future generations. This allows the family’s wealth to grow without being diminished by taxes.
Are There Funding Limitations?
Yes, funding a Dynasty Trust may be subject to gift tax. However, by using the lifetime gift tax exemption and generation-skipping transfer (GST) tax exemption, you can avoid paying these taxes when setting up the trust. Proper planning allows you to maximize the amount transferred without triggering additional taxes.
How Do Beneficiaries Access Property?
The structure of a Dynasty Trust varies. Some trusts give beneficiaries more control over the assets, while others employ professional trustees to manage distributions. The trust can even act as a “family bank,” lending money for major investments like purchasing a home or starting a business.
Can the Creator Retain Control?
Yes, the creator of a Dynasty Trust can retain significant control, including the ability to hire and fire trustees and manage investment decisions. This control ensures the trust continues to serve the family’s financial goals long after its creation.
For more information, contact our office at Askew & Associates, P.A. by calling 954-546-2699.
Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns.