Dynastic Planning: Using a Dynasty Trust to Protect a Legacy Against Future Estate Tax Liabilities

Most estate plans fail to insulate future generations against estate tax. This is a huge flaw in traditional “off the shelf” estate planning techniques.

You may go to an estate planning attorney to draft a trust to pass your assets to heirs and think that you’ve done the best job possible for your beneficiaries. The potential problem here is that the vast majority of trusts today are designed to last for a single-generation only and will terminate at some point during the beneficiaries lifetime. This forces heirs to distribute assets out of the trust at a certain point during their lifetime.

Many trusts will obligate the beneficiaries to distribute all assets from the trust in a lump sum by a certain date. Others will provide a distribution schedule that forces assets out of the trust in increments once the beneficiary has attained certain ages.

The problem is that once assets are distributed from a trust to the beneficiary these assets now become part of the beneficiary’s taxable estate and will be considered for future potential estate taxes the beneficiary’s estate may owe.

This causes the potential for estate taxes to be paid over and over again upon the death of each successive generation.

Our approach to estate planning is different. We incorporate dynastic trusts as the cornerstone of our planning principles in helping clients create a unique wealth transfer plan. This type of trust is perpetual in nature and lives on for multiple generations.

Assets remain inside the dynastic trust as opposed to being distributed from it. Beneficiaries have full use of their inheritance just as before. Heirs can use the assets to make purchases of residences, cars, vacation properties, investments… anything at all. The difference is that the assets remain inside of the trust.

Because the assets are owned by the trust, the potential of future estate taxes upon the transfer to future generations is eliminated.

The dynasty trust is designed to permit the passage of significant wealth through multiple generations without the imposition of transfer taxes, even though the trust beneficiaries have a beneficial enjoyment in the trust property similar to outright ownership.

To learn more about the potential benefits of creating a “Dynastic Wealth Transfer Plan” please feel free to contact me for more information.

To schedule a complimentary meeting, either in person or by telephone, please use the use the CONTACT US link and let me know.

I look forward to meeting you!