Definition
A dynasty trust is a long-term trust designed to pass wealth across multiple generations while minimizing estate and generation-skipping transfer taxes.
How It Works
Assets placed in the trust, using exemption amounts, can benefit children, grandchildren, and beyond without being taxed in each generation's estate. States that allow very long or perpetual trusts are common homes for these structures.
Example
A family funds a dynasty trust that supports multiple generations, with assets shielded from estate tax at each generational transfer.
When It Works Best
It works best for families with wealth well above the exemption who want a multi-generational legacy with tax efficiency.
Who It Applies To
Very high-net-worth families focused on long-term legacy.
Watch-Outs
These trusts are permanent and inflexible by design, require careful drafting and trustee selection, and depend on generation-skipping transfer tax exemption being allocated correctly.
