Dynasty Trust

DEFINITION of 'Dynasty Trust '

Long-term trusts created to pass wealth from generation to generation without incurring transfer taxes such as estate and gift tax. The dynasty trust's defining characteristic is its term. The trust can survive for 21 years after the death of the last beneficiary who was alive when the trust was set up, and it can theoretically last for more than 100 years. The beneficiaries of a dynasty trust are usually the grantor's children, and after the death of the last child, the grantor's grandchildren or great-grandchildren generally become the beneficiaries. The trust's operation is controlled by the trustee who is appointed by the grantor. The dynasty trust is irrevocable, which means that once it is funded, the grantor will not have any control over the assets or be permitted to amend the trust terms.

BREAKING DOWN 'Dynasty Trust '

In order to stem the loss of billions of dollars in estate taxes, Congress enacted the generation-skipping transfer tax (GSTT) in 1986. While the GSTT is applicable to dynasty trusts, every individual (as of 2012) has a GSTT exemption of $5.12 million, or $10.24 million in case of a married couple.

RELATED TERMS
  1. Generation-Skipping Transfer Tax ...

    A tax incurred when there is a transfer of property by gift or ...
  2. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  3. Gift Tax

    A federal tax applied to an individual giving anything of value ...
  4. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  5. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission ...
Related Articles
  1. Retirement

    6 Estate Planning Must-Haves

    You need an estate plan even if you don't have significant assets. Learn what you need to include in yours.
  2. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  3. Options & Futures

    An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  4. Taxes

    A Look At The Generation-Skipping Transfer Tax

    For those who encounter this tax, it can be costly. Find out how to navigate this complicated tax arrangement.
  5. Retirement

    Skipping-Out on Probate Costs

    Don't let bad estate planning lead to unnecessary costs and stress for your inheritors.
  6. Personal Finance

    The Top 6 Books for Estate Planning

    Here are six outstanding books that can help you with your estate planning.
  7. Estate Planning

    Estate Planning: 16 Things To Do Before You Die

    If you don’t plan your estate, your surviving family may have to deal with disputes and probate that were avoidable.
  8. Your Practice

    Advisors: $240B in Fees Up for Grabs by 2030

    Advisors have an opportunity to win generational assets over the next 15 years. Here are some tips on how to cater to different demographics.
  9. Personal Finance

    Want Your Will to Prevail? Don't Die Intestate

    If you die without making a last will and testament, you are said to have died intestate. What happens to your assets in this case?
  10. Your Clients

    When to Trust a Revocable Trust

    Unsure of how your assets will be dispersed once you're gone? Here's how setting up a revocable trust while you're here can be a big benefit.
RELATED FAQS
  1. Are estate planning fees tax deductible?

    Estate planning fees may be tax deductible, but only if certain conditions have been met. Internal Revenue Service (IRS) ... Read Full Answer >>
  2. Can personal loans be included in bankruptcy?

    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
  3. How much money does Texas make from unclaimed property each year?

    In 2014, the office of the Texas Comptroller of Public Accounts reported $234 million in unclaimed property claimant liabilities, ... Read Full Answer >>
  4. How much money does Michigan make from unclaimed property each year?

    According to the 2013-2014 Annual Report of the State Treasurer, the state of Michigan earned only $82,875 in abandoned and ... Read Full Answer >>
  5. Who decides if a financial security should be escheated?

    There is no one entity who "decides" to escheat assets. Rather, financial institutions are required to report inactive accounts ... Read Full Answer >>
  6. Will 529A plans replace special needs trusts?

    529 ABLE plans, also known as 529A plans, are state-sponsored accounts authorized by Congress that allow people with disabilities ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center