A Dynasty Trust is a long-term trust that allows individuals with considerable wealth to protect and preserve their assets for multiple generations. Dynasty Trusts are exempt from transfer taxes, like estate and gift taxes. Establishing a Dynasty Trust also protects the assets in the trust from death taxes, as well as other situations that, under different circumstances, would threaten the beneficiaries’ interest in your assets (such as creditors and divorces).
Additionally, a Dynasty Trust is a great tool to use for those who want to make sure their children and grandchildren are provided for but don’t necessarily trust their ability to manage large sums of money responsibly.
So what else is there to Dynasty Trusts? Here we provide 4 additional things everyone considering establishing one should know:
Dynasty Trusts aren’t only for large estates
It’s a common assumption that smaller estates (those with less than a million dollars in assets) can’t justify Dynasty Trust protection. However, a reduced Dynasty Trust protection can be provided for those who’d like to preserve portions of their estate for future generations.
Dynasty Trusts don’t last forever (in some states)
Some states don’t place limitations on trust duration, allowing the trust to continue passing from generation to generation indefinitely. Others, like Alaska, Maryland, South Dakota, Idaho, and Wisconsin, have done away with laws against perpetuities—requiring the trust to end 21 years after the death of the last known beneficiary.
The trustee for a Dynasty Trust should be a corporation
Because the purpose of a Dynasty Trust is to last throughout several lifetimes, many choose to designate a corporate trustee, such as a bank or an independent trust company who will be able to serve as trustee for the entire lifetime of the trust.
A charity can be a beneficiary of a Dynasty Trust
Many people like to gift a portion of their assets to charity upon their passing. This can also be done in a Dynasty Trust. Incorporating a charity into a Dynasty Trust is relatively simple. For example: you can have your attorney include a provision that states that with every beneficiary’s passing, 20% of the trust’s assets gets donated to the charity of your choice.
Disadvantages to Consider with Dynasty Trusts:
- Because Dynasty Trusts last through several lifetimes, a corporation is usually named as the trustee, which is most often accompanied by substantial administrative fees.
- The amount of wealth decreases with each generation.
- The longer the trust lasts, the less the beneficiaries are related to the decedent.
For many affluent families, a Dynasty Trust plays an integral part in their long-term, multi-generational planning. Establishing a Dynasty Trust allows you to have a certain amount of control over your hard-earned money even after your passing and frees your beneficiaries from overwhelming tax-related issues.
Let’s Get You Started Today!
If you have questions about establishing a Dynasty Trust, other kinds of trusts and wills, or any other New Jersey estate planning law questions or concerns, give the experienced legal team at the Matus Law Group a call. Contact us here or call (732) 281-0060 today!