Trusts, in general, offer several benefits. As a unique type of trust, is a dynasty trust right for you? How does a Dynasty Trust work?
A trust offers you an estate planning strategy that delivers several benefits. You protect your assets from creditors, lawsuits, and judgments. Depending on the type of trust, you can enjoy tax breaks and the privacy of your personal financial information. Although trusts come in several forms, three players remain the same regardless of the type of trust that you set up. A grantor establishes the terms of a trust. A trustee manages the trust according to the grantor’s wishes. The beneficiaries receive the value of the assets as determined by the grantor.
What is a Dynasty Trust?
A dynasty trust works like other types of trust in that it passes on wealth to a future generation. However, a dynasty trust does not pass on wealth to just one generation of your family. It gives you the legal leverage to pass on your wealth to more than one future generation. The most important feature of a dynasty trust is that it lasts much longer than other types of trusts. Depending on the state where you live, you can set up a dynasty trust to last for more than 100 years.
Because a dynasty trust covers multiple generations, it avoids repetitive taxes that make other estate planning tools less appealing. Not every state allows the formation of a dynasty trust because of a common-law principle called “rule against perpetuities.” To learn whether your state permits the formation of dynasty trust and for how long you can set one up, speak with an experienced estate attorney who has a thorough knowledge of the estate planning laws passed by each state.
How Do I Set Up a Dynasty Trust?
The first step is to consult with an estate planning lawyer. Your attorney can walk you through the remaining steps that help you establish a trust that takes care of the future generations of your family.
Name the Trustee and Beneficiaries
Deciding who you want to manage a dynasty trust is the most challenging decision you can expect to make. The trustee you choose must possess impeccable integrity and honor every one of the terms you have written into the trust. After you select the trustee, then you name the beneficiaries.
Determine the Assets to Include
As another complex issue, determining the assets to place in a dynasty trust has significant value and taxation implications. Since other types of trusts do not offer the tax advantages you get with a dynasty trust, you should consider placing your highest valued assets in a dynasty trust. Real estate is one of the most important assets to consider for placement in a dynasty trust since land is a valuable asset to pass on to future generations.
Declare How the Trust Distributes the Funds
You have to answer several questions before you add the terms of distribution to a dynasty trust. How much control over assets do you want each beneficiary to have? When do you want each beneficiary to have access to the assets placed in the dynasty trust? Do You want to add stipulations that required the beneficiaries to use the money in specific ways?
Fund the Dynasty Trust
You can add assets to a dynasty trust during your lifetime, as well as after your death. Since a dynasty trust is considered an irrevocable family trust, you cannot add or remove assets into the trust after signing off on the agreement. This means funding a dynasty trust requires careful consideration before you agree to the terms of the trust.
Consult with an Estate Planning Attorney
To learn whether a dynasty trust is the right estate planning tool for you and your family, schedule a free initial consultation with one of the estate planning lawyers at Cloud Peak Law Group.
