Multi-generational wealth structures require coordination across state lines and often international borders. How we work with trust counsel in Delaware, South Dakota, Nevada, and offshore jurisdictions to ensure clean documentation.
Dynasty trusts are deceptively complex structures. The concept is straightforward—create an irrevocable trust that can last for multiple generations, removing assets from your taxable estate while maintaining family control and asset protection. But execution requires coordinating across different legal systems, each with its own rules about trust duration, tax treatment, asset protection, and permissible trustee powers.
We work with clients who have existing trusts in multiple jurisdictions, who are considering moving trusts from one state to another, or who are establishing new structures with both U.S. and offshore components. The process requires coordination between your estate attorney, tax counsel, trust administrators, and often offshore counsel—with each jurisdiction's specific rules affecting the overall structure.
Not all states allow perpetual trusts. Many still enforce the common-law "rule against perpetuities," which limits trust duration to lives in being plus 21 years. That's a problem if your goal is multi-generational wealth transfer.
Delaware, South Dakota, Nevada, Alaska, and several other states have abolished or significantly extended the rule against perpetuities, allowing trusts to exist for hundreds of years or indefinitely. But the differences don't stop there—each jurisdiction has different rules about trustee requirements, tax treatment, asset protection, and what powers you can reserve while still achieving estate tax exclusion.
Delaware offers strong asset protection, well-developed trust law, and no state income tax on trust income if beneficiaries are non-residents. South Dakota has similar advantages plus stronger asset protection for self-settled trusts and no income tax at all. Nevada provides particularly strong asset protection but has less developed trust case law.
The decision isn't just about choosing the "best" jurisdiction—it's about which specific features matter for your structure, your family situation, and your asset composition.
To establish a trust in a particular state, you typically need either a trustee located in that state or significant trust administration occurring there. This isn't a formality—it's a substantive requirement that affects where the trust can be taxed and what law governs trust administration.
Most sophisticated structures use an institutional trustee or trust company based in the chosen jurisdiction. This gives you professional administration, satisfies situs requirements, and provides liability protection—individual trustees can be sued personally, while institutional trustees provide a corporate shield.
That said, institutional trustees come with limitations. They won't make investment decisions outside their comfort zone. They won't hold certain alternative assets. They charge ongoing fees based on AUM. And they can be replaced only under circumstances specified in the trust agreement or state law.
We help structure trustee arrangements that balance control, flexibility, and compliance. Often this means an institutional trustee for administrative functions while investment decisions are directed by a trust protector, investment committee, or through a directed trust structure where the trustee takes instructions from a separate investment advisor.
Many clients with significant international exposure combine U.S. dynasty trusts with offshore structures—typically in jurisdictions like the Cook Islands, Nevis, or the Cayman Islands for asset protection, or in Switzerland or Singapore for operating businesses.
The coordination matters because of tax reporting requirements, foreign trust rules, and potential conflicts between U.S. tax law and offshore asset protection benefits.
If a U.S. person creates an offshore trust, it's generally treated as a "grantor trust" for U.S. tax purposes—meaning all income is taxed to the grantor regardless of distributions. This eliminates most tax benefits but can still provide asset protection and succession planning advantages.
More commonly, we see U.S. dynasty trusts that hold interests in offshore entities—a Delaware trust that owns a Cayman Islands LLC, for example. The U.S. trust provides estate tax benefits and creditor protection under domestic law, while the offshore entity holds international assets and provides additional asset protection layers.
But this requires careful coordination. The trust document must permit holding offshore investments. The trustee must be willing to serve as member or shareholder of foreign entities. And reporting requirements—FBAR, Form 8938, Form 5471/5472/8865 depending on entity type—must be understood and followed.
To exclude trust assets from your taxable estate, you generally cannot retain significant control over the trust. But "control" is a technical term of art—some powers are fine, others blow up the entire structure.
You cannot serve as trustee with discretion over distributions to yourself or your spouse. You cannot retain the power to revoke or amend substantial provisions. You cannot retain the power to determine who receives income or principal.
But you can retain certain powers through careful structuring: serving as investment trustee with limited powers, appointing a trust protector with authority to replace trustees or modify administrative provisions, granting a power of appointment to a spouse or descendant, or retaining the right to swap assets of equivalent value with the trust.
The most sophisticated structures use a "trust protector"—someone (often a trusted advisor or family member) with limited powers to modify trust terms, replace trustees, or change trust situs without causing estate tax inclusion. This provides flexibility without sacrificing tax benefits.
Creating the trust is one thing. Funding it is another. And what you transfer, when you transfer it, and how you structure the transfer all have tax implications.
Many dynasty trusts are funded with annual exclusion gifts—currently $18,000 per beneficiary per year, or $36,000 for married couples splitting gifts. This allows tax-free transfers but requires Crummey notices and creates administrative complexity.
Others are funded with larger lifetime-exemption transfers—currently $13.61 million per person. This uses up your estate tax exemption but allows immediate transfer of significant assets, particularly valuable for assets expected to appreciate substantially.
For family businesses or investment portfolios, we often see initial funding with minority interests or diversified securities, followed by gifting strategies or sales to defective grantor trusts over time. The specific mechanics depend on asset type, valuation considerations, and your other estate planning objectives.
Timing matters particularly for assets with volatile values. Transferring assets during periods of depressed valuation (market downturns, early-stage companies, temporarily distressed assets) maximizes the amount you can move within exemption limits.
Dynasty trusts often hold assets for decades. This means your investment strategy must accommodate both the trustee's fiduciary requirements and the trust's long-term objectives.
Many institutional trustees won't hold certain alternative investments—direct private equity, hedge funds with lockups, cryptocurrency, operating businesses, or direct real estate. They want marketable securities they can value, monitor, and liquidate if needed.
If you plan to transfer alternative investments into a dynasty trust, address this before choosing a trustee. Some trust companies specialize in alternative assets. Others will accept these holdings under a directed trust structure where they take instructions from a separate investment advisor. Still others simply won't do it.
We help coordinate between your estate attorney (who drafts trust language permitting alternative investments), your trust company (who needs to understand and accept what they'll be holding), and your investment counsel (who needs authority to direct investments). All three need to be aligned before you fund the trust.
Finally, remember that dynasty trusts require ongoing administration—tax returns, beneficiary communications, trustee meetings, accounting, and periodic reviews of trust provisions against current law.
Most institutional trustees prepare trust tax returns, maintain books and records, and produce annual accountings. But someone needs to coordinate trust activities with your overall wealth structure—particularly if you have multiple trusts, family entities, or cross-border considerations.
We serve as the coordination point between your trust company, tax advisors, estate counsel, and investment managers. When trust law changes, when trustees need to make discretionary decisions, when beneficiaries need distributions, or when investment opportunities require trust action—someone needs to orchestrate the process.
Process note
Dynasty trust planning requires coordination between specialists in different jurisdictions, each with their own perspective and requirements. We manage this coordination process—connecting your estate attorney, trust company, tax counsel, and investment advisors to ensure everyone is working from the same playbook. The goal is a structure that works legally, administratively, and practically for your specific situation.
These structures are complex, but when properly implemented they provide multi-generational asset protection, tax efficiency, and family governance. The key is getting the coordination right from the beginning—because unwinding or reforming dynasty trusts after the fact is difficult, expensive, and sometimes impossible.