Dynasty Trust – A Simple Concept

Dynasty trust is a concept unknown to many people but is worth exploring. It is a long-term trust created primarily to pass on wealth without incurring a generation-skipping transfer tax.

The Basic Tax Issues

Before getting deep into the dynasty trust, let’s first understand the fundamental tax issues that come with the generation-skipping transfer tax.

Suppose you want to leave your property to your son with the intention that your son will leave it to your grandson and so on. To make it less complicated, let’s assume that your asset is worth $10 million and has already had its share of federal estate tax exemption.

Still, your son would be required to pay the current top estate tax rate of 40%, which reduces the asset to the value of $6 million. Well, we are not done here. When the property reaches the grandson, it will value $3.6 million.

You see how the tax liability will keep on eating away the value of your assets as they pass on to the next generation. But there is one way you can avoid the higher tax liability on your assets.

Avoid Higher Tax Liability with Dynasty Trust

The tax liability, along with the generation-skipping tax, swallows the asset you are planning to transfer. Both these taxes can be avoided with the help of dynasty trust. You can create dynasty trust in one of many states of the United States that allow for it.

Contact an Experienced Estate Planning Attorney

If you want further information or any help regarding dynasty trusts, contact us right away. At Keystone Asset Protection and Estate Planning, we would be more than delighted to provide our services so that you can protect your assets and preserve your hard work.