Is a Dynasty Trust Right for Me?

Establishing a Dynasty trust in Florida is one of the best ways for high-net-worth families to preserve wealth for future generations. A Dynasty trust allows a Grantor (the person who sets up the trust) to place assets in the Trust that can pass on to future generations while minimizing taxes and the risk of losing the funds.

How Does a Dynasty Trust Work?

A Grantor puts their assets into an irrevocable Trust. Assets can include almost anything of value, such as stocks, bonds, cash, or real estate. The Grantor names Beneficiaries who will receive distributions from the Trust, as well as Trustees, who will manage the Trust. In addition to naming the immediate Beneficiaries and Trustees, the Grantor provides instructions on who the Beneficiaries should be for future generations (generally direct descendants of the Grantor) and how new Trustees should be selected when the original ones resign from their position, pass away or become incapacitated. This ensures that the Trust funds stay in the family until they are exhausted.

There are several ways that the Trust could pay out to its beneficiaries. Some common methods include:

• Distributing a percentage of the Trust assets to Beneficiaries each year
• Funding major life milestones for Beneficiaries, such as weddings or home purchases
• Funding education and/or healthcare for Beneficiaries

Why Set Up a Dynasty Trust?

A Dynasty Trust offers high net worth families several benefits:

• In Florida, Dynasty Trusts can live for up to 1,000 years, providing future generations with wealth for centuries to come. Very few states offer such a generous timespan for Dynasty Trusts.
• The assets in the Trust, including the appreciation on the Trust assets, are shielded from transfer taxes provided the Grantor allocates his or her Generation-Skipping Transfer Tax Exemption to the Trust.
• A Dynasty Trust is typically established as a “Grantor Trust” for income tax purposes which makes the Grantor responsible for the income taxes on the Trust.  This is beneficial for wealth transfer purposes because the Grantor’s payment of the tax is not considered a gift to the trust, it depletes the Grantor’s estate by the amount of tax paid (which is good for estate tax purposes) and it allows the Trust to grow income tax free.
• The assets stay in your family. In contrast, if your assets passed to your child outside of a Trust and your child divorced their spouse, the ex-spouse may gain access to the assets. With a Dynasty Trust, the assets that have not been distributed are protected.
• The Trust protects the assets from irresponsible Beneficiaries and Heirs and ensures its longevity. For example, if you were to give your child a large inheritance outright, they could squander it all, leaving nothing for your grandchildren or great-grandchildren. In contrast, the Dynasty Trust provides distributions of specific amounts over time, protecting the remainder for future generations.
• Since the Trust owns the assets rather than the Beneficiaries, the assets are protected from creditors for the duration of the Trust.

Once the assets are moved into the Trust, the Grantor loses control of them and the Trustee manages the Trust moving forward. For this reason, it’s essential to work with a highly experienced attorney who can advise you on which assets to move, how to move them, and how to select a Trustee. It is also possible to create a Dynasty Trust that begins upon your passing through your Will or Revocable Trust.

Huth, Pratt, and Milhauser has established Dynasty Trusts for many high-net-worth families in Florida. Call us today to learn if a Dynasty Trust is right for your family.

Huth, Pratt and Milhauser

Huth, Pratt and Milhauser is a boutique law firm that offers a wide range of legal services in the specialty areas of wills, trusts, estates, probate, guardianship, and related matters. The range of legal services that Huth, Pratt & Milhauser provides in these specialty areas includes planning, administration and litigation. The experience and skills of our attorneys and staff, coupled with our knowledge of applicable law, enable us to provide outstanding representation to our clients.

Although we are located in South Florida, we proudly serve clients throughout the country and around the world from our Boca Raton offices. We strive to provide superior and focused counsel in a timely manner and at a competitive price.

Huth, Pratt and Milhauser

2500 North Military Trail, Suite 460

Boca Raton, Florida   33431

Phone: 561-392-1800

www.hpmlawyers.com

2500 North Military Trail, Suite 460
Boca Raton, Florida   33431
Phone: 561-392-1800

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