A Dynasty Trust is a common term used for trusts that are designed to last for multiple generations. Typically a Dynasty Trust is established by a parent for the benefit of their children, grandchildren and/or future descendants.
A Dynasty Trust can be established as a separate stand alone trust for the benefit of the family, or the terms of a Dynasty Trust can be incorporated into an individual’s estate planning documents, including Revocable Living Trusts, Irrevocable Life Insurance Trusts, Wills and other types of estate planning structures.
Dynasty trusts can be set up in any state, however many states have restrictions on how long a trust can last. This is called the Rule Against Perpetuities, which generally provides that a trust must terminate within 21 years after a certain person designated in the trust passes away. This can limit the term of the trust to roughly 120 years. Certain states have modified or repealed the Rule Against Perpetuities, which make them more attractive states for setting up Dynasty Trusts, since the trust can last for a longer period of time. In Wyoming, pursuant to state law, a Dynasty Trust can be structured to last for up to 1,000 years. An individual does not have to be a resident of Wyoming to set up a Wyoming Dynasty Trust.
With a Dynasty Trust, assets can remain in the trust, and can pass from generation to generation without the imposition of estate or generation skipping transfer (gst) taxes, which can result in significant estate tax savings. This is contrasted with leaving the assets directly to the children, outside of a trust, which can result in estate tax inclusion and potential estate taxes when the beneficiary passes away, and taxed at each subsequent generation. The assets held in the trust can be used or distributed for the benefit of the family members, so the Dynasty Trust assets are not unduly restricted in a manner in which they cannot be accessed by the beneficiaries. Subject to certain restrictions, a child or family member can also be appointed to serve as Trustee of the Dynasty Trust.
Another great benefit of the Dynasty Trust is that the trust assets can provide protection from creditors of the beneficiary in the event of bankruptcies, lawsuits and divorce. Dynasty Trusts are a very common estate planning vehicle, given the benefits afforded to the family and beneficiaries, and relative ease of administration.
Contact our office to learn more about the benefits of establishing a Wyoming Dynasty Trust, or incorporating the provisions of a Wyoming Dynasty Trust into your current estate planning documents.
Wyoming Statute Section 34-1-139. Perpetuities; time limits for vesting; restrictions on selected lives; legislative intent.