A dynasty trust is a trust set-up by a parent or grandparent that allows one’s inheritance to forever be protected in trust form.
Why this is important:
Estate Taxes: creating this type of trust allows your children or grandchildren to continue to forever grow these trusts assets and they will FOREVER be excluded from your child’s taxable estate upon their passing. Why? Well, they didn’t create the trust! Technically, your children or grandchildren are not the owners of this money.
Creditor Protection: Dynasty Trusts offer protection from creditors, lawsuits, bankruptcies, and divorces. With this type of set-up you can allow your child to be a trustee of this trust at a certain age but if they ever run one of these aforementioned creditor risks an independent trustee may be appointed and can block all distributions that would be detrimental to your child.
Responsibility: Instilling inheritance in trust form rather than outright instills a greater sense of responsibility. When you package your assets in a trust and hand them to your loved ones there are rules that your children or grandchildren then have to follow. They don’t just have unfettered control and discretion. This can provide important lessons in money values and money management.
Philanthropy: Protecting money in a trust can permit considerable growth, and in turn, can permit charitable giving. Once a child’s basic needs are met they can start using the trust to contribute to those causes they find most valuable. Check out the most recent New York Times Article on philanthropy amongst young inheritors. Is everybody going to have a trust fund that grows to the considerable amounts mentioned in this article, absolutely not. However, creating various trusts or redistributing trust wealth is a way to give back to the community or a cause that’s important to a particular family. You’d be surprised how many of my clients have started foundations for their own family members. No matter how big or small, you’ll find that every person has a cause.
Estate planning really does offer creativity. There are many tools in the toolbox that can protect your family in a variety of ways.
This article was submitted by Attorney Amy Antonellis of the Law Offices of Amy Antonellis: "Helping families successfully plan for their future"
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