Dynasty Trust

Receive the benefits of this trust once used only by the ultra-rich.


Forming a Dynasty Trust With Anderson

A Dynasty Trust is an irrevocable trust that gives you, as the grantor, control over how to distribute your wealth and assets across multiple generations. This option has been popular with our wealthy clientele because it minimizes both estate and generation-skipping taxes.

Most conventional trusts payout in lump sums by design. A Dynasty Trust, in contrast, pays out over the lifetime of the beneficiaries, then their kids’ lives, and so on.

The assets belong to the trust until distributed. This ownership keeps the assets remaining within it out of the beneficiary’s creditors reach. Dynasty Trusts have long been used to protect beneficiaries from their mistakes, but they are only effective when correctly formed by an expert.

Experience You Can Trust

Anderson Advisors can help you determine which trust best suits your wants and needs. To ensure your satisfaction and maximize your trust’s benefits, we examine factors such as entity structures, the rule against perpetuities, and estate taxes. If a Dynasty Trust does not suit your needs, we can always find a more suitable option, such as an Irrevocable Life Insurance Trust, Asset Protection Trust, or Qualified Personal Residence Trust, that will better help you achieve your goals.

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What You Can Expect When Forming a Dynasty Trust with Anderson

You will receive a private Strategy Session with an attorney to determine if a Dynasty Trust is the best solution for your needs. If it is determined that a Dynasty Trust is right for you, then your trust will be drafted and shipped to you for execution. You will then have the benefits of lower taxes and greater control over how your wealth is distributed.

The trust would work something like this: Assume you create a Dynasty Trust and transfer (gift) in $1MM of stock in your company. Over the years, that stock becomes worth significantly more – let’s say $5MM. The original gift would be tax-free, as it is well under the lifetime gift tax exclusion. The $5MM is not part of your estate, so it would not be used in the calculation of the estate tax upon your passing. This is a huge saving since the growth will not be part of your estate, your beneficiary’s, or their children, and so on.

The Dynasty Trust not only saves you money on estate taxes, but it avoids unintentionally compounding the estate taxes of a wealthy child’s estate. Assume you have built a nice nest egg and you leave it to your kids, all of whom have become successful professionals. With a Dynasty Trust, your estate will not be included in their estate and subsequently will not be taxed at current estate tax rate at the time they pass, which is guaranteed to be higher than it is now.

“…They have taken the time to determine and tailor a plan to best protect me. Anderson Business Advisors are a must for your power team.” Carlton L.

St. Louis, MO

Anderson Advisors FAQ

Dynasty Trusts bad Policy?
The rule against perpetuities was based on the idea that it’s bad for society—and especially a society that prides itself on social and economic mobility, like the United States—to reward strategies that concentrate wealth in families over many generations. Why give tax breaks to dynasty trusts, which give descendants of wealthy families access to wealth that can’t be touched by taxes or creditors?
How to Create a Dynasty Trust?

Needless to say, these trusts are complex and must be carefully prepared by a lawyer who has experience with trusts, taxes, and investments. No one knows what the future may bring, so flexibility is important. For example, you don’t want to tie beneficiaries to a trustee (a bank or trust company) that may not manage trust assets well.

And as anyone who has been paying attention knows, federal gift and estate tax rules—which have a big effect on a trust that’s designed to avoid these taxes—have changed significantly in the last few years and are likely to be amended again soon.

How is a Dynasty Trust Taxed ?
Income taxes are still due on income generated by trust assets. For this reason, people generally prefer to put non-income-producing assets into dynasty trusts—assets such as growth stocks that don’t pay dividends, or tax-free municipal bonds. It’s also common to transfer life insurance policies to a dynasty trust. After the policyholder’s death, the policy proceeds can be used to pay estate tax that’s owed on other assets in the estate.

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