For Dynasty Trusts, Time May Be Running Out

For Dynasty Trusts, Time May Be Running Out

If you want to take advantage of higher estate tax exemptions by establishing a dynasty trust for your heirs, consider making your move soon. President Obama’s 2012 budget proposes to limit these trusts to 90 years.

Dynasty trusts shelter assets from estate taxes for multiple generations, or in some states forever.

Another reason to move ahead now is that the newly generous $5 million per individual tax exemption is slated to disappear at the end of 2012, and it’s not clear what the level will be in 2013. The funds in a dynasty trust are only sheltered up to the exemption amounts in force at the time you establish the trust.

Placing money in a dynasty trust also helps protect the assets from the consequences of divorce, from creditors and lawsuits, and from uncontrolled spending by one or more heirs.

Laws governing dynasty trusts vary widely from state to state. Some states impose limits, often mandating that trusts must dissolve 21 years after the death of the last beneficiary among those who were alive at the time the trust was formed. Other states impose arbitrary length limitations, while some allow dynasty trusts to last forever.

If you live in a state with limits you don’t like, you may be able to establish a dynasty trust in another state. We can help you determine how to set up a dynasty trust so it is designed to be most beneficial to you and your descendants.