How Does a Dynasty Trust Work?
You may have already decided to forgo a Last Will and Testament for a trust. Or, at the very least, incorporate both documents into your overall estate plan. But from here, you must also decide which trust type to proceed with. That is, there are two main options of revocable and irrevocable trust, but from here there are also different varieties for each. Namely, this blog will focus on the irrevocable trust type of dynasty trusts. So without further ado, please continue reading to learn how a dynasty trust might work to the benefit of your future generations and how one of the experienced Butler County trust attorneys at Heritage Elder Law & Estate Planning, LLC can help determine your eligibility for setting one up.
How does a dynasty trust work for future generations?
As the name alludes to, a dynasty trust is an irrevocable trust type that allows you (i.e., the grantor) to pass on your property and assets to your descendants, and then their descendants, and so on and so forth (i.e., the beneficiaries).
Essentially, this works because a dynasty trust is permitted to curb the generation-skipping transfer (GST) tax instituted by the Internal Revenue Service (IRS). This may make a huge difference in the amount you can preserve for your loved ones, as the GST tax is separate from, and in addition to, the mandatory imposed estate tax. And as of 2025, the GST tax rate is quite significantly set at a flat rate of 40 percent.
Therefore, a dynasty trust may be your way to have your property and assets last, remain within, and be used by your family for generations to come. Namely, for much longer than if you were to opt for any other trust type, or worse yet, a simple Last Will and Testament.
How do I know if I can set up a dynasty trust?
Starting on January 1, 2025, the IRS set the federal estate, gift, and GST tax exemptions at $13.99 million per taxpayer. For married couples, this means an exemption of $27.98 million. Notably, this is a $380,000 increase from 2024, to factor in inflation.
This is all to say that you should strongly consider setting up a dynasty trust is your overall estate totals more than $13.99 million or $27.98 million if you are married. You might not be quite there, but you may still be considered a high-net-worth individual or one part of a high-net-worth couple. Nonetheless, at this point, we still do not think you should shy away from contemplating another irrevocable trust option.
Speaking with an attorney is never a bad idea, even if you are unsure whether you require legal advice to set up your estate plan just yet. So when in doubt, please schedule an initial consultation with one of the skilled Butler County estate planning & probate attorneys from Heritage Elder Law & Estate Planning, LLC today.
