In Estate Planning, a Dynasty Trust is an Irrevocable Trust incorporated into a Will or Revocable Living Trust designed never to end, but instead continue perpetually providing for descendants. A Dynasty Trust may also be included within other Irrevocable Trusts, such as Irrevocable Life Insurance Trusts and Disclaimer Trusts.
A Dynasty Trust shelters the trust assets over generations from death taxes as well as the beneficiaries’ divorces and creditors. A Dynasty Trust can contain Special Needs Trust language, so a recipient is not excluded from needs-based government programs. If a beneficiary cannot be trusted to manage their money, a Dynasty Trust can be designed to protect the recipient from themselves. It is an excellent device to keep assets within the family. If developed and managed correctly, a Dynasty Trust may also be a significant tool to avoid state income taxes.
Example: Father’s Will divides his assets into shares down his bloodline which, at his death, is two equal shares one for Son and one for Daughter. At Father’s death Son is being sued. If drafted correctly, the Dynasty Trust shelters the inheritance from Son’s creditors. At Father’s death Daughter is divorcing. If written correctly, the Dynasty Trust shelters the inheritance from Daughter’s spouse.
Example: Using the facts from the prior example, Son dies soon after Father survived by his three children. The Dynasty Trust divides the remaining trust assets into three equal shares, one for each of Son’s children, and the Dynasty Trust continues.
Here are some questions clients, beneficiaries, and Trustees ask:
Each state has rules dictating how long a Dynasty Trust may last. Several states, such as Pennsylvania and New Jersey have no time limit. Dynasty Trusts can last forever in these states.
Yes, For example, you can say the Dynasty Trusts end at a specified date or the death of the last grandchild.
You can include or exclude anyone from a Dynasty Trust.
No, you can include anyone. Though, as the term indicates, most people limit beneficiaries to their descendants.
You can incorporate a charity into a Dynasty Trust. For example, you could say that each Beneficiary’s death, 10% of the trust’s assets pass to Penn State.
If you have any questions about Dynasty Trusts or any other estate planning topics, please contact us to schedule a free consultation. For more than two decades Klenk Law has focused only on Estate Law. We’ve seen it all, and this experience allows us to explain complex estate law and planning techniques clearly and concisely. We make it easy for you to understand Dynasty Trusts and Estate Planning so you can make the best decisions for yourself and your family.
Peter Klenk is the founding member of Klenk Law, a seven attorney boutique estate planning law firm. We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School. He served his country in the Navy JAGC during Desert Storm. Easy to talk to, feel free to call Peter for an appointment. We will make the process as easy as possible!
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