If you have amassed a substantial amount of wealth and want to make sure your future generations – not just your immediate family – benefit from it, setting up a dynasty trust might be a good option for you. What exactly is a dynasty trust? Why do you need one? These are vital questions to address when you are thinking of your estate plan. Talk to a knowledgeable California trust attorney for the right advice.
What Is a Dynasty Trust?
A dynasty trust – also commonly referred to as a legacy trust – is an estate planning tool which allows you to pass down your wealth to future generations. Unlike a living trust, which is created for the purpose of distributing your assets to your beneficiaries in the event of your death, a dynasty trust can be used to provide financial support to your family for multiple generations.
Why Do You Need a Dynasty Trust?
You Can Support Your Family for Generations
The biggest advantage of setting up a dynasty trust is that it allows you to preserve your wealth and make sure your future generations benefit from it. California law allows dynasty trusts to continue for a period of 90 years from the date on which it is created. It gives you the opportunity to provide financial support to your children, grandchildren, and great grandchildren and cement your legacy.
You Get to Decide How Your Wealth Is Managed and Distributed
Like a living trust, a dynasty trust also allows you to dictate how your wealth needs to be preserved, managed, divided, and distributed to your future generations. For instance, you can add a clause to your trust to make sure your beneficiaries can receive their share of the wealth only if they meet certain criteria. Similarly, you can also add a clause to specify the circumstances under which a beneficiary can be disqualified or excluded from receiving distributions.
You Can Protect Your Assets from Creditors
Assets placed in a revocable trust can be attached by creditors, if they have a valid court order. Assets placed in a dynasty trust, on the other hand, cannot be accessed or attached by creditors under any circumstances. Similarly, if any of your beneficiaries is sued by a third party, the assets in your trust cannot be used to compensate them. So, with a dynasty trust in place, you can rest assured that your wealth will only be passed on to the intended beneficiaries – no matter what.
You Can Protect Your Assets from Your Beneficiaries’ Spouses
As cynical as it might sound, there is no guarantee that all your beneficiaries will have a long and happy married life. Data shows that over 50% of marriages in the US end up in a divorce. More importantly, a significant percentage of these divorces are contested and often result in a long-drawn legal battle, at the end of which the marital assets are divided and distributed between the spouses.
With this being the case, it makes sense for you to set up a dynasty trust and place your assets in it, so that they do not get commingled with your children’s or grandchildren’s marital assets and are not divided and distributed in the event of a divorce.
You Can Avoid Paying Hefty Taxes
This is one of the biggest reasons why wealthy families and high net worth individuals tend to set up dynasty trusts. Under normal circumstances, your beneficiaries will have to pay estate taxes every time your family’s wealth is passed on to the next generation. With a dynasty trust in place, you only have to pay estate taxes once. Your assets will not be taxed when they are passed on to the next generation, the generation after that, and so on.
Similarly, under normal circumstances, if you want to transfer your assets to your grandchildren – instead of your children – you might have to pay what is called a generation skipping transfer tax. If you, on the other hand, create a dynasty trust with the right kind of provisions, you can avoid paying the generation skipping transfer tax and transfer your assets to whomever you want.
Need to Set Up a Dynasty Trust in California? We Can Help!
If you have built up a substantial amount of assets and want to leave a legacy for your future generations, setting up a dynasty trust might be the right strategy. At Garmo & Garmo, we have decades of experience in creating all types of trusts, and we have helped countless clients over the years with their estate plans.
Our La Mesa, CA estate planning attorneys can create a trust which accurately reflects your wishes and make sure your wealth is passed on to your descendants from one generation to another – without any bureaucratic or judicial intervention.
To find out more about dynasty trusts or to know how you can create one, call us today at 619-441-2500 or contact us online and schedule a free and confidential consultation with one of our experienced lawyers.