Estate Planning Lawyer Los Angeles

Dynasty Trusts, Day One

What’s all the fuss about Dynasty Trusts?  That’s what this series of blogs is about to uncover.  Many clients and potential clients raise a similar question; they want to know about the so-called “Dynasty Trusts” they’ve been hearing so much about.  Rather than leaving you to your own devices, I thought I’d cover them in depth over the next few postings.

A Dynasty Trust, also known as a Generation-Skipping Transfer Trust provides several things for the trust’s creator; namely it provides longevity that other Trusts may not, and secondly it provides estate tax savings that can be substantial.

Regarding the longevity factor, Dynasty Trusts can be set up in certain states that have modified what is known as the Rule Against Perpetuities, an olde English, common law, concept that specifies a trust cannot last for longer than 21 years plus ‘lives in being.’  One of the factors that most grantors who found a Dynasty Trust like most about it is the fact that it can go on ‘forever,’ depending on the specific laws of the state in with it was founded.

Regarding the factor of substantial estate tax savings, read on.  Thanks to a recent change in tax law, this formerly-controversial approach to providing for one’s family over the long-term has become quite popular.

You may be familiar with the Tax Relief Act, which recently passed in December of 2010.  This long-awaited act created the option to fund trusts of $5 million and over without incurring as big a tax bill as in the past. What 2010’s Tax Relief Act has done in the process is promote the formation of generation-skipping transfer trusts.

So why should you care?  Well, for starters, it’s estimated that taking into account the estate taxes that are applied to each generation, one could save 80 percent of one’s estate through three generations by simply executing a Dynasty Trust.  Intrigued?  You may well be.  Over the next few days we’ll cover some of the ins and outs of the trusts, as well as some commonly-asked questions.  Stay tuned.  You’ll be glad you did.