The Downside of an Estate Plan That Can Last Forever is that It CAN Last Forever

With a growing number of jurisdictions breaking away from the rule against perpetuities, there is the potential to draft dynasty-styled trusts that are designed to last for many generations, anticipate for varied needs, continue accumulating wealth, and provide asset protection long into the future.

Because these trusts can have such a long time horizon, the only thing we can be certain about is that everything will change- family circumstances, tax laws, even markets. Given this uncertainty, dynasty trusts should be drafted as flexible as possible so as not to lock future beneficiaries into out-of-date provisions.

For maximum flexibility, a power of appointment can permit beneficiaries to change the trust provisions, shift the trust to another location, or even terminate the trust to meet changing family circumstances and tax laws. Powers of appointment can allow the original heir to pass the trust on to whomever he chooses and to dictate the degree of control the successor beneficiary enjoys. This gives each generation the control to take into account how their children are growing up and amend the trust accordingly.

Flexibility should also be built into administrative provisions as well. Particularly the power to invest, so trustees can meet changing market conditions. Provision should be made for successor trustees to ensure an orderly transition over the long term.

Families can multiply over the generations, to the point where trusts need to be split to be manageable and to avoid family strife. To solve this problem, dynasty trusts can be drafted so that a "per stirpes" split takes place at each generation. Under a "per stirpes" arrangement, lineal descendants are each entitled to a share of the original beneficiary's share. Even then, a power of appointment could allow trustees to change the arrangement if necessary.

Conversely, families can die out over time. To cope with this potential many dynasty trusts build in a fallback provision, such as giving trustees the power to name charities as beneficiaries.

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!