What is a dynasty trust and how does it work?

On Behalf of | Nov 4, 2022 | Estate Planning |

A dynasty trust can play an important role in estate planning. This trust gives you a reliable way to pass wealth from one Tennessee generation to the next. Here are some facts to help you decide if a dynasty trust is in your future.

Purpose of a dynasty trust

In the past, there were stipulations about how long a trust could last, based upon what was known as the rule against perpetuities. Now, however, as long as there are funds in a dynasty trust, the trust can continue for many generations.

The terms never change

A dynasty trust has set rules about the management and distribution of funds. Once you fund the trust, you can’t amend its terms. Beneficiaries also can’t amend the trust – no matter how much time passes. This is important to consider during the estate planning process. If there’s a chance you might want to amend the terms, then a dynasty trust isn’t your best option.

Tax benefits to the estate

Taxes are a concern when you are preparing your estate plan. That’s because taxes can swallow a significant amount of wealth. One benefit of a dynasty trust is that assets in the trust are no longer a part of your taxable estate.

All about beneficiaries

The creator of the trust (the grantor) generally appoints their children as the beneficiaries. As long as the trust has funds, it can provide benefits for several generations. If the grantor’s children are the beneficiaries, the grantor’s grandchildren or great-grandchildren will eventually receive benefits. But anyone the grantor chooses can become a beneficiary. This includes non-human entities, such as non-profit organizations and charities.

Choosing a dynasty trust

The pros and cons of establishing a dynasty trust depend on your estate planning goals. And now is the time to start thinking about the future. Do thorough research before making your final decision.

Costner & Greene Attorneys at Law

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Maryville, TN 37804




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