Benefits of Dynasty Trusts
Dynasty Trusts are special trusts that you can utilize for a complete estate plan. Dynasty Trusts have several benefits, such as tax reduction, providing for several generations, and protecting your loved one’s inheritance from creditors. In this article, we will go in-depth about the advantages Dynasty Trusts offer. Then you can decide if they are a good fit for your estate plan.
Provide for Generations
Dynasty Trusts allow you to provide for your family for generations to come. Dynasty Trusts are created to encourage the trustee to hold the assets in trust as long as possible, instead of distributing the funds outright. This allows the money to last as long as you desire. Typically, your children will benefit from the trust funds first, followed by your grandchildren, then great-grandchildren.
Tax Reduction Strategies
Dynasty Trusts save your descendants money in estate taxes. How does this work? The assets that you put into the trust are subject to gift and estate tax, at the time the assets are transferred into the trust. If you gifted everything outright to your children, it would be subject to estate tax then, and again when your children pass the money to your grandchildren. After the initial transfer, you will not have to pay estate tax again, even if multiple generations benefit. However, if the trust assets generate income, the amount earned will be subject to income tax.
It is also important to take the Generation Skipping Transfer Tax into account. GSTT is a tax protocol put into place to prevent people from avoiding estate taxes by distributing their assets to their grandchildren, instead of to their children. Thus, skipping a generation. As long as a transfer falls under the exclusion amount, your state will not be subject to the transfer tax. For 2016, the exclusion amount is $5,450,000. Any amount over this is tax at 40%.
Usually, Dynasty Trusts are set up with very strict terms on how the money is to be used and distributed. You can choose to give the trustee the majority of the control and the beneficiary very little. This is advantageous if you have beneficiaries that have poor money management skills. It also protects the money from being wasted to support a beneficiary who has addictive behaviors, such as drug abuse or gambling. Even if it’s just a bet on basketball at mansionbet.com website here.
When you create the trust, you outline the terms that the trustee must follow. Such as what the trustee can spend money on for the beneficiary. If you trust your beneficiaries, you can grant them more power to spend and manage their money. You can even appoint them as trustees of their own trust.
Protect Your Beneficiaries
Besides preventing your beneficiaries from quickly spending down their trust, a Dynasty Trust also provides other means of protecting their inheritance. Dynasty Trusts keep the trust funds separate from the beneficiary’s name. Since their funds are never in their name, most secular institutions will not consider the money to be the beneficiary’s. Due to this, the money is safe from bankruptcy, divorce, and creditors. This is a huge advantage that a Dynasty Trust offers that is not possible to accomplish with a Revocable Living Trust.
When creating an estate plan, everyone has different goals. If you are trying to lessen estate taxes, provide for multiple generations, retain control over your money, protect your beneficiaries from themselves, or from creditors and divorce, a Dynasty Trust may be just what you need. At Wealth Guardian Legal Documents, we can help you to complete put an air tight estate plan into place for an affordable price.
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