How Can Dynasty Trusts Be Used to Protect and Transfer Assets?

People and families with a high net worth will want to make sure they take the correct steps to protect their assets and transfer them to future generations as efficiently as possible. Dynasty trusts offer a powerful solution for doing so. They can secure wealth, protect against financial losses, and ensure that assets are transferred to heirs correctly. An attorney who is experienced in estate planning for wealthy families can help ensure that dynasty trusts are created and managed correctly.

What Are Dynasty Trusts?

A dynasty trust, also known as a perpetual trust, is a long-term trust designed to pass wealth to future generations without incurring estate taxes. Unlike traditional trusts, dynasty trusts can last for multiple generations, often up to 100 years or more, depending on state laws. These trusts are irrevocable, meaning that once they are established, the terms cannot be easily changed. This can provide strong protection against creditors and lawsuits while ensuring that assets can be distributed correctly to future generations.

Benefits of Dynasty Trusts

• Tax advantages: Dynasty trusts can help families avoid estate taxes for multiple generations. When assets are transferred to a dynasty trust, estate taxes or transfer taxes will not apply. Beneficiaries can receive distributions from the trust without the requirement to pay estate taxes or generation-skipping transfer taxes, although they may be required to pay income tax on the amounts they receive. 
• Asset protection: Assets held in a dynasty trust are protected from creditors and legal claims against the beneficiaries. This can help prevent potential financial losses. Assets can also be safeguarded from being divided in the event of a beneficiary’s divorce.
• Control and flexibility: The trust creator (known as the grantor) can set specific terms for how and when assets will be distributed, ensuring that their wealth will be used wisely. The terms of a trust can include provisions that allow for adjustments based on changes in law or family circumstances.
• Family legacy: Dynasty trusts enable the preservation and growth of family wealth across multiple generations. Provisions can be included for charitable giving, allowing a family to support causes they care about over the long term.

Steps to Follow When Creating a Dynasty Trust

1. Consult with an estate planning attorney: Family members can discuss their goals with an experienced lawyer to determine whether a dynasty trust is suitable for their needs. At the Gierach Law Firm, we help families understand how state and federal laws may affect these trusts.
2. Identify goals: A person or family will need to clearly define their objectives, including who will benefit from the assets held in a dynasty trust and the conditions for transferring assets to beneficiaries. It is important to consider how assets will be managed and distributed.
3. Draft the trust document: Our attorney will draft a comprehensive trust document. This should specify the duration, beneficiaries, and conditions for distributions. 
4. Select a trustee: A person or organization will be appointed to oversee the trust. A certain family member, a trusted advisor, or a professional trustee may ensure that assets in the trust will be managed correctly, including making investments, protecting against financial losses, and distributing assets to beneficiaries.
5. Fund the trust: Assets will be transferred into the trust. These assets can include cash, real estate, stocks, business interests, and other valuable property. Funding the trust properly is crucial to ensuring that it will function as intended.
6. Understand tax implications: It is important to be aware of what taxes may apply to assets held in a trust and what steps can be taken to minimize the amounts that must be paid. Our attorney can help address gift tax exemptions and other relevant tax considerations.
7. Review and update the trust regularly: Although dynasty trusts are designed for the long term, it is important to review them periodically. Our lawyer can help ensure that a trust will continue to be aligned with a family’s goals while complying with any changes in laws.

Contact Our Naperville, IL Dynasty Trust Attorney

Dynasty trusts can protect and transfer assets across multiple generations. The knowledgeable DuPage County estate planning lawyer at the Gierach Law Firm can provide guidance on how to use trusts and other tools to meet your family’s needs. Contact our office at 630-228-9413 to arrange a consultation and begin taking steps to ensure that your assets are protected and your legacy is preserved for future generations.