Wealthy Nevadans who want to ensure future generations of their families benefit from their money may want to consider establishing dynasty trusts. These trusts can help money used to fund them to grow indefinitely, allowing multiple generations to benefit from it.
A dynasty trust is irrevocable, meaning that once it’s established, the grantor cannot make changes to it. These trusts reduce the size of the grantor’s estate and also help reduce the federal estate tax burden their families would otherwise have. The 2015 federal estate and gift tax exemption is $5.43 million, and it will increase to $5.45 million in 2016. If people set up a dynasty trust and fund it with $5 million, they may allocate that portion as their allowed exemption.
Setting up the trust in a state like Delaware can help because that state allows trusts to continue in perpetuity. This means the trust can benefit generations of heirs, helping to ensure they will enjoy wealth and comfort. Grantors can make distributions to beneficiaries contingent upon their reaching certain milestones. They may want to make such provisions flexible to allow for beneficiaries who may be different from others.
Trust planning can be used to accomplish a variety of different estate goals. People may use trusts to do such things as care for a special needs child, fund a charity and avoid the probate process. In addition, unlike a will, a trust can place restrictions on how and when a beneficiary will receive distributions. This can be helpful if grantors are concerned, for example, that a certain beneficiary will be profligate with a lump-sum bequest. An estate planning attorney can be helpful in explaining other uses of trusts.