Dynasty Trusts—Can You Seriously Say No???
Dynasty Trusts are created to benefit your decedents, not you! In New Jersey since the revocation of the “Rule Against Perpetuities”, Dynasty Trusts, in theory, can be created to last forever; however in reality almost all clients decide that they should be terminated after approximately three generations—for a multitude of reasons.
The Dynasty Trust can be funded with any asset with a title and without any taxation when the asset is transferred into the trust and since the asset is now removed from your estate as well as your name, therefore the value of the asset is (1) thereby eliminated from possible estate taxation and as well as (2) provide you with a reduction equal to the value of the asset in the probate expense of your estate. Additionally, your estate can be the “beneficiary” of any asset and transferred into the trust upon death but you will not have created any estate tax reduction, and you also will not have reduced your estate administration expense.
It is very common for the Dynasty Trust to be drafted in such a way as to distribute the income and or principal as you wish, installment distributions are actually the norm, not the exception—depending upon your feelings and belief about the beneficiary and his/her ability to responsibility receive and prudently handle the distribution. Like all trusts, the Dynasty Trust appoints a Trustee (and my preference is to appoint a contingent Trustee). The trustee is guided by fiduciary obligations but the Trustee is primarily guided by your determination in how narrow or wide discretion you provide in the creation of the Trust document.
In conclusion, even if a tax savings is not your primary objective, the trust will reduce your probate expense and, if properly drafted, significantly reduce the possibility of estate litigation for the generations of its existence.
Let’s have a consultation to further discuss this……
October 4, 2019
Steven W. Tarta, Esq. brings more than 45 years of professional experience to his practice, with a sophisticated focus on Estate Tax Planning, Living Trusts and Elder Law.