What is a legacy trust?

On Behalf of | May 3, 2022 | Estate Planning |

As people live longer and accumulate more wealth, they look for additional ways to retain that wealth, which they hope will last for years to for their beneficiaries. A dynasty trust is one such estate planning tool that creates a tax-free foundation of wealth, expected to last for generations and, in some states, forever.

As long as the assets remain in a dynasty trust, you gain certain tax advantages, too. Those advantages include the elimination of transfer taxes — estate taxes, gift taxes and generation-skipping transfer taxes. (The latter tax is when a grandparent gives money to a grandchild.)

California trust can last 90 years

Trusts already can last a long time. Among the common rules pertaining to trusts is that they remained in place for 21 years after the last beneficiary died. However, certain states such as Delaware, Nevada and South Dakota have discontinued rules against perpetuities, allowing people to create dynasty trusts that can last a long, long time.

Here are some key points about dynasty trusts:

  • California adopted the Uniform Statutory Rule Against Perpetuities (USRAP), allowing a dynasty trust to last for 90 years after the day of its creation.
  • A dynasty trust also is an irrevocable trust, meaning that its terms cannot be changed once funded.
  • Under current law, a person can put as much as $11.7 million into a dynasty trust for 2021.
  • The trustee is usually a bank or financial institution.

When considering a dynasty trust, research every detail to determine the advantages. A legal ally can help explain how such a trust may help you.

Growing tax-free for generations

A dynasty trust allows money to grow tax-free through many generations. During estate planning, consider this financial tool as a strong and effective option that allows you to pass your wealth to several generations of your family.