{"id":1024,"date":"2018-08-21T14:47:36","date_gmt":"2018-08-21T18:47:36","guid":{"rendered":"https:\/\/fluentricciardi.com\/?p=1024"},"modified":"2022-01-27T14:51:08","modified_gmt":"2022-01-27T18:51:08","slug":"why-have-a-dynasty-trust","status":"publish","type":"post","link":"https:\/\/fluentricciardi.com\/why-have-a-dynasty-trust\/","title":{"rendered":"Why Have A Dynasty Trust?"},"content":{"rendered":"

One of the major complications facing aging individuals is the passing down of wealth to the next generation without creating large tax implications.\u00a0 The dynasty trust is a straightforward estate planning technique that can substantially reduce taxes.<\/p>\n

<\/p>\n

The dynasty trust is a long-term trust, spanning the length of years after the death of the creator of the trust, used to pass wealth from generation to generation without incurring the transfer taxes that are usually associated with gift tax, estate tax and generation skipping tax.\u00a0 Assets that are transferred into a dynasty trust are subject to tax when the transfer is made and only if the assets exceed the federal tax exemption limits.\u00a0 If adequately funded and managed, a dynasty trust can ensure financial support for generations without taxation and without the uncertainty of what will be done with the assets.<\/p>\n

Historically, wealthy heads of family would create trusts that utilized the distributions to the decedent beneficiaries for maintenance and would then distribute the principal to the grandchild upon death.\u00a0 Once it was realized that this allowed estate taxes to essentially skip a generation, Congress enacted the generation skipping transfer tax.\u00a0 Generation Skipping Trusts were first introduced in the late 1970s that went after direct gifts as well as transfers to trusts for the benefit of an unrelated person who are more than one generation younger than the donor. \u00a0With this came an exemption.\u00a0 In 2018, the exemption is $11.18 million (single).\u00a0 Since dynasty trusts are taxed only on the amount of transfer above the exemption allowed for a\u00a0Generation Skipping Trust<\/a>, wealthy families can pass along at least the exemption amount to their heirs tax-free.\u00a0 Furthermore, the gains on the transferred assets are also exempt from gift and estate taxes.\u00a0 Dynasty trusts are also irrevocable, ensuring that the trust stays out of the grantor\u2019s estate at death.\u00a0 The beneficiaries also do not retain control of the trust assets, and they are therefore not counted toward the beneficiaries\u2019 taxable estates.<\/p>\n

An additional benefit of dynasty trusts is that they can shield assets from liabilities that may arise for the beneficiaries.\u00a0 Because the assets are not owned or controlled by the beneficiary, they cannot be included in marital estate for divorce process or child support, subject to creditor claims, or civil judgments.\u00a0 Temporary trusts cannot provide this same level of protection.\u00a0 As temporary trusts are predetermined at its creation, it can be terminated based on the age of the beneficiary, after a certain number of years, or a variety of other instances that may not suit the needs of the beneficiary.<\/p>\n

When setting up a dynasty trust, it is important to also look at the state.\u00a0 Many states do not allow for trusts to live on past the death of the grantor and have set up limitations also known as\u00a0Rule Against Perpetuities<\/a>. \u00a0Certain states, such as Alaska, Delaware, Nevada, New Hampshire, and South Dakota have done away with perpetuity rules.\u00a0 An additional cause for concern during the creation of the trust is if the state has personal income tax.\u00a0 If so, the distributions to the beneficiaries may create an income tax liability.\u00a0 Any non-distributed income of the trust will generally be subject to income tax in the state of jurisdiction as well.\u00a0 Choosing a state without income tax to establish the trust in can lend itself to additional tax benefits to future generations as well.<\/p>\n

Dynasty trusts can also be set up to provide for charitable giving.\u00a0 There are two ways in which a charity can benefit from a dynasty trust.\u00a0 The first is simply to have the charity be a named beneficiary of the trust.\u00a0 Be sure to structure the trust so that the charity only receives the trust assets not used by the decedent beneficiaries. \u00a0This puts family first and any remainder goes to the charity. Another option is to couple the dynasty trust with a\u00a0charitable lead trust<\/a>.\u00a0 This allows for guaranteed charitable giving alongside the distributions to descendants.<\/p>\n

One of the great benefit to a dynasty trust is the ability to dictate much of the requirements of the distributions.\u00a0 The wording can dictate amounts due to charities, maintaining good credit by the beneficiaries, medical and education distributions, support and the like.\u00a0 This allows for continuation of the values of the original grantor.\u00a0 The verbiage of the trust ensures that the distributions are made and are generally for immediate use.\u00a0 There are times that it may be desired for the trust to provide a loan to a beneficiary for additional capital, or to directly invest in an asset for the beneficiary.\u00a0 While a beneficiary can serve as trustee, for the continued assuredness of the grantor\u2019s vision, money lending, better asset protection due to distance from the assets, and prevention of establishing a new trustee upon death, an institutional trustee is generally preferred.\u00a0 It is important to be sure that the trust contains language regarding the hiring and firing of a trustee, as well as having provisions regarding when, if ever, a beneficiary can become a trustee.<\/p>\n

The benefits of a dynasty trust is that it allows you to preserve your wealth for future generations, continue to give charitably after death, provide asset protection, and save on taxes.\u00a0 The limitations on flexibility during your own and future generations lifetimes can be a disadvantage over more temporary trusts.\u00a0 There are many ways to fund and structure a dynasty trust to ensure continued support for the family.\u00a0 As with all types of estate planning, deciding whether to incorporate a dynasty trust is a big decision.\u00a0 Careful evaluation of your estate and your goals should be made with your financial advisors.<\/p>\n","protected":false},"excerpt":{"rendered":"

One of the major complications facing aging individuals is the passing down of wealth to the next generation without creating large tax implications.\u00a0 The dynasty trust is a straightforward estate planning technique that can substantially reduce taxes.<\/p>\n","protected":false},"author":6,"featured_media":1025,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"yoast_head":"\nWhy Have A Dynasty Trust? - Fluent & Ricciardi<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fluentricciardi.com\/why-have-a-dynasty-trust\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Have A Dynasty Trust? - Fluent & Ricciardi\" \/>\n<meta property=\"og:description\" content=\"One of the major complications facing aging individuals is the passing down of wealth to the next generation without creating large tax implications.\u00a0 The dynasty trust is a straightforward estate planning technique that can substantially reduce taxes.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/fluentricciardi.com\/why-have-a-dynasty-trust\/\" \/>\n<meta property=\"og:site_name\" content=\"Fluent & Ricciardi\" \/>\n<meta property=\"article:published_time\" content=\"2018-08-21T18:47:36+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-01-27T18:51:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/fluentricciardi.com\/wp-content\/uploads\/2022\/01\/3-dynasty-trust_1_3.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"667\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Becky Bertuzzi\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Becky Bertuzzi\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/fluentricciardi.com\/why-have-a-dynasty-trust\/\",\"url\":\"https:\/\/fluentricciardi.com\/why-have-a-dynasty-trust\/\",\"name\":\"Why Have A Dynasty Trust? 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