A dynasty trust is a legal arrangement meant to protect assets from estate taxes, creditors, and spouses of trust beneficiaries. The assets in a dynasty trust are taxed only once at its inception. This type of trust is also irrevocable and gives little discretion to the beneficiaries, which may be desirable.
What Does a Dynasty Trust Do?
A dynasty trust can ensure that a person’s estate is passed down through many successive generations. An ordinary will, which simply gives property to a beneficiary (usually a child of the testator), does not guarantee that the estate will be made available to future generations – the beneficiary might simply spend the money or sell the property, taking it out of the family forever.
Once a dynasty trust is created, however, it cannot be revoked under any circumstances. As with many irrevocable trusts, some flexibility is given up in favor of security.
How Long Can a Dynasty Trust Last?
Theoretically, a dynasty trust could last forever because it is inaccessible to creditors and other outsiders. However, in most cases, the legal protection against creditors does not last forever. For example, in Alaska, a dynasty trust can last for 1,000 years, as long as the assets remain with the beneficiaries of the trust. In many other states, dynasty trusts can last for several hundred years.
How Can an Estate Planning Attorney Help?
If you think that a dynasty trust is something that might benefit your family, you may want to incorporate one into your existing estate plan. Before setting one up, you should speak with an estate lawyer, who can advise you of your options.