Dynasty Trusts Make Sense for Certain Wealthy Families - WSJ
8/17/16, 7:20 PM
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http://www.wsj.com/articles/dynasty-trusts-make-sense-for-certain-wealthy-families-1471359534
MARKETS | YOUR MONEY | WEALTH ADVISER | ADVISER VOICES
Dynasty Trusts Make Sense for
Certain Wealthy Families
High-net-worth clients concerned about estate taxes are prime candidates for dynasty
trusts, but restrictions abound
Aug. 16, 2016 10:58 a.m. ET
Mark A. Oller is administrative vice president and managing director at
Wilmington Trust Co., a wealth-management firm in Wilmington, Del.
Voices is an occasional feature of edited excerpts in which wealth
managers address issues of interest to the advisory community. As told
to Cheryl Winokur Munk.
Mark. A. Oller, administrative vice president and managing director at Wilmington Trust… assets
in dynasty trusts remain free from estate taxes in perpetuity. PHOTO: WILMINGTON TRUST
When it comes to trusts, many advisers are familiar with the
conventional kind designed to protect the assets of immediate family
members such as a spouse, children and grandchildren. But some
wealthy families may benefit from what is known as a dynasty trust.
http://www.wsj.com/articles/dynasty-trusts-make-sense-for-certain-wealthy-families-1471359534
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Dynasty Trusts Make Sense for Certain Wealthy Families - WSJ
8/17/16, 7:20 PM
For affluent families, dynasty trusts offer multiple advantages over
more conventional trusts, allowing multiple generations of
beneficiaries—even those not yet born. Under current law, this means
that a grandfather, for example, can leave his wealth even to greatgrandchildren not yet born and not have to worry about federal estate
taxes eating into his family’s wealth.
In a conventional trust, assets are normally left to living beneficiaries.
Moreover, in a typical trust, there is an end point, often 21 years after
the death of the last grandchild. At that point, the assets would be
distributed to the heirs of the grandchildren and estate taxes may be
due. A dynasty trust, however, doesn’t end. This means the assets
remain free from estate taxes in perpetuity, which is a powerful
impetus for many wealthy families.
Another major benefit of a dynasty trust is that it protects successive
generations of beneficiaries from creditors. A conventional trust
offers creditor protector for beneficiaries who are alive and benefiting
from the trust at the time it is established, but it doesn’t cover
successive generations. A dynasty trust, however, provides longerterm creditor protection. Even a beneficiary born many years after
the trust is established reaps protection from creditors.
While dynasty trusts offer many advantages for certain wealth
situations, they may not work for everyone. They are usually most
appropriate for individuals with at least $5.45 million in net worth or
couples with a net worth of $10.9 million or more because these
families are concerned with minimizing estate taxes.
Dynasty trusts aren’t allowed in all states. To take advantage of the tax
benefits, trusts need to be set up and administered in a state that
allows them. Even if the trust exists in a state other than where the
grantor resides, advisers can potentially manage the assets in the trust
depending on state laws and how the trust is structured.
Establishing a dynasty trust is a decision for a family’s wealth that is
going to last generations, so there needs to be collaboration between
the financial adviser, the family’s attorney and family members to
make sure the terms are reasonable and accomplish the goals of the
grantors.
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