What is a Dynasty Trust?
A Dynasty Trust is a trust that lasts for a period of time in excess of the rule against perpetuities. In California the perpetuities period and therefore the maximum period of time a trust can exist, is 21 years after the death of a person living at the time of creation of the trust. In general, a Dynasty Trust should be set up in a state that has completely abolished the rule against perpetuities, thus permitting the Trust to exist for an extended period of time. There are numerous instances when a Dynasty Trust may be useful as part of your estate plan. This type of trust is an estate planning tool that is often underutilized.
For example, do you have a vacation home you want kept in the family for your children and grandchildren to enjoy long after your death? You can create a Dynasty Trust to be the beneficiary of your vacation home. By utilizing an Irrevocable Life Insurance Trust (ILIT) or other property exempt from estate taxes to fund the Dynasty Trust to cover maintenance expenses of your vacation residence, combined with utilizing Qualified Personal Residence Trust (QPRT) to hold the vacation home until your death, you can not only reduce or eliminate any estate taxes but may also be able to eliminate the imposition of any generation skipping transfer taxes to your heirs making use of the property.
If you want to provide for grandchildren and more remote descendants for an extended period of time, there are various techniques that can be utilized allow you to fund a Dynasty Trust during your lifetime or upon your death and still have that funding be free from, gift, estate or generation skipping transfer taxes, thereby permitting your heirs to receive the maximum benefit from your legacy.
Drafting a Dynasty Trust is a part of a sophisticated estate plan requiring the assistance of a qualified and experienced estate planning attorney. If you are looking for a qualified and experienced estate planning attorney, please contact us today to schedule your complementary consultation.