Taxes, creditor’s claims, and other financial obligations can threaten to erode your heard earned money once you are no longer living. A Dynasty Trust, also known as a legacy or generation-skipping trust, is a tax-effective way to transfer significant assets to beneficiaries. By establishing a Dynasty Trust you can essentially erect a wall around the money which you have worked so hard to earn. This can help minimize transfer taxes and provide significant asset protection for generations of beneficiaries. It is important to remember that Dynasty Trusts are not only fur the ultra wealthy. They can be beneficial for anyone seeking to preserve wealth in order to benefit many generations. Listed below are a few of the benefits:
Tax Savings: In general the death benefit will pass income and estate tax-free to your named beneficiaries. In addition, the money that you gift to a Dynasty Trust to pay premiums may be sheltered from gift tax and will reduce your estate for estate tax purposes. Furthermore, life insurance policy cash values grow on a tax-deferred basis and can be accessed in a tax-favored manner.
Protection from Creditors: The trust can include provisions that forbid your loved ones from selling their interest in the trust. This limits the rights of your loved ones potential creditors to touch trust assets in order to pay outstanding debts.
Incentives Based on Your Values: The terms of the trust can offer loved ones incentives that correspond with your own values. For example, there could be an incentive for future generations to attend and graduate from college. Or, an incentive could be included to further a family business or continue involvement in a specific charitable organization. This is a very unique way to preserve your families legacy.
If you think a Dynasty Trust might work for you let us know, and as your financial advisors we can work with you and your estate planning attorney to construct a plan that can benefit your loved ones for many generations to come.