A comprehensive estate plan might include many layers.  After drafting and executing your foundational estate plan, we at OC Wills and Trust Attorneys consult with clients to implement additional planning strategies to protect their assets for generations to come.

You have worked hard to amass your assets and you want to make sure those assets are protected, not just for your family but for future generations.  One of the most effective ways to accomplish this is by the use of a dynasty trust. A dynasty trust is a specific type of long-term trust created with a sizeable amount of assets and designed specifically for the benefit of future generations.  These trusts are created to avoid or minimize estate and generation skipping taxes when transferring wealth from one generation children, grandchildren and great-grandchildren.

How Does a Dynasty Trust Work?

A dynasty trust is created when a significant amount of wealth is transferred into a trust created for the benefit of future generations, with certain restrictions such as only providing access to income and not principal. The trust can be established now or by a provision in your will or revocable living trust.  One can establish a dynasty trust for a variety of reasons including, but not limited to, providing for the health care, education and living expenses of beneficiaries.  Usually, an amount that falls under the Federal gift tax exemption is transferred to avoid tax liability.

A trustee is appointed to make distributions to beneficiaries according to the terms of the trust.   In certain situations, you may decide that the trustee should exercise some limited discretion in terms of who gets the distribution and to what extent.  As a result, the funds in the trust continue to grow for the benefit of later beneficiaries.   Also, the limited control allows the trust to be passed to your beneficiaries’ beneficiaries without being subject to estate tax.    When created properly, a dynasty trust will prevent tax consequences resulting from the Federal gift tax, estate tax and generation skipping transfer tax.

Advantages of a Dynasty Trust

In most situations, we will name your primary beneficiary the trustee of his or her own dynasty trust.  This offers the beneficiary significant control over the inheritance with some restrictions designed to preserve the principal over years to come.  Dynasty trusts are also used to protect assets.  If your beneficiaries directly own their inheritance it may be susceptible to claims by others.  With the funds protected by the trust they will be out of the reach of creditors, divorcing spouses and judgments.  Dynasty trusts are very popular because they offer superior asset protection.  They will also have no affect on government benefits and will not be subject to estate taxes, saving your beneficiaries money.  By using a Trust Protector provision, beneficiaries can also decide whether they need further protection after the trust is created.  Depending upon the situation, different levels of protection can be implemented by the beneficiary.

Many of the concerns involved in estate planning revolve around control.  Much of your estate plan is dependent upon how much control you would like to have before and after you die.  Your beneficiaries will also be expecting to have complete control over their inheritances.  At OC Wills and Trust Attorneys, we can help you decide how much control is right for you and your beneficiaries and advise you on what your estate plan should include in order to maintain the desired amount of control.

Our attorneys are experienced and skilled in the areas of family protection planning and asset protection.  We use all of the latest tools and techniques to achieve all of your estate planning goals.  Contact OC Wills and Trust Attorneys in Orange County, California for a consultation by calling (949)347-5256.