Lawyer Monthly - July 2023 Edition

Elijah Keyes Starting simply, what is a ‘dynasty trust’ and who is it meant to serve? A dynasty trust is a type of irrevocable trust designed to provide long-term financial management, asset protection and wealth preservation for future generations in a family. It is created to serve the interests of an individual or family, aiming to maintain and transfer wealth to future generations while minimising loss to divorce, creditors and estate taxes. The key feature of a dynasty trust is its duration, which can last for multiple generations. In California, the maximum term of a dynasty trust is often about 90-100 years after creation, but other US states have longer terms, sometimes in perpetuity. The beneficiaries of a dynasty trust typically include the settlor’s (the creator’s) children, grandchildren and subsequent generations. By utilising a dynasty trust, the grantor can ensure that the assets within the trust remain protected from estate taxes, creditors and potential divorces or lawsuits that beneficiaries might face. My Legal Life Effective Use of Dynasty Trusts Distinct from trusts solely intended to protect the creator, dynasty trusts are unique in allowing wealth to be preserved across multiple successive generations. We hear from experienced estate planning attorney Elijah Keyes in this article, which takes an in-depth look at dynasty trusts. What benefits do they have to offer trustees, and what are the potential complications that should be taken into account? MY LEGAL LIFE 25 What distinguishes dynasty trusts from other forms of estate planning, and what are the benefits of using one? Most estate planning is used to avoid probate courts. We use revocable trusts to avoid probate court proceedings to transfer assets after the death of a loved one. We also use general durable powers of attorney and advance health care directives to appoint representatives when a person loses capacity in order to avoid the requirements of a court-appointed agent call conservator or guardian. However, dynasty trusts are used to protect future generations after the creator’s death, not the creator. It is used to protect future generations in three specific ways: Protection in the Event of Divorce: More than 50% of marriages end in divorce. California has significantly higher divorce rates than the rest of the US. If assets are left directly to a child who later goes through a divorce, the spouse may receive half of the money and use it to purchase a brand-new car to drive away from the divorce court!

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