A dynasty trust, also known as a perpetual trust, is one way for older individuals to pass on wealth to many future generations. It can offer various advantages because of its unique timeline.
When you are mapping out your estate plan, a dynasty trust can supplement your asset distribution for a long period of time.
What is a dynasty trust?
A dynasty trust allows a grantor, the document’s creator, to pass on wealth to a long line of generations.
This means that you could transfers assets to your children, then your grandchildren and even your great grandchildren because Delaware does not impose a limit on the duration of dynasty trusts.
What are its benefits?
Drafting a dynasty trust for your estate plan could be advantageous because of how you can structure its distribution of assets. This document can offer:
- Tax exemptions: A dynasty trust is only subject to estate and Generation Skipping Transfer Tax (GSTT) once the assets enter the trust and if these exceed tax thresholds. The GSTT threshold currently sits at $13.6 million per beneficiary in 2024 but may drop to about $7 million by 2026. Once the trust is effective, future asset transfers may no longer be subject to taxation.
- Succeeding beneficiaries: Because of the structure of a dynasty trust, you can name your children as beneficiaries and once they pass, your grandchildren could become the beneficiaries. This could continue for succeeding generations.
- Smooth transfer: A trust does not have to go through probate court. This means that your beneficiaries could receive your assets without delays or court fees and also give them more privacy.
It is important to note that a dynasty trust is a form of irrevocable trust. This means that only the court or the trust’s beneficiaries could modify its terms, but only under certain circumstances.
A dynasty trust has many advantages that could benefit your estate plan. This document can help you provide for your family for generations to come and could shield your estate from hefty taxes.