A Dynasty Trust is a common term used for trusts that are designed to last for multiple generations. Typically a Dynasty Trust is established by a parent for the benefit of their children, grandchildren and/or future descendants.
A Dynasty Trust can be established as a separate stand alone trust for the benefit of the family, or the terms of a Dynasty Trust can be incorporated into an individual’s estate planning documents, including Revocable Living Trusts, Irrevocable Life Insurance Trusts, Wills and other types of estate planning structures.
Dynasty trusts can be set up in any state, however many states have restrictions on how long a trust can last. This is called the Rule Against Perpetuities, which generally provides that a trust must terminate within 21 years after a certain person designated in the trust passes away. This can limit the term of the trust to roughly 120 years. Certain states have modified or repealed the Rule Against Perpetuities, which make them more attractive states for setting up Dynasty Trusts, since the trust can last for a longer period of time. In Wyoming, pursuant to state law, a Dynasty Trust can be structured to last for up to 1,000 years. An individual does not have to be a resident of Wyoming to set up a Wyoming Dynasty Trust.
With a Dynasty Trust, assets can remain in the trust, and can pass from generation to generation without the imposition of estate or generation skipping transfer (gst) taxes, which can result in significant estate tax savings. This is contrasted with leaving the assets directly to the children, outside of a trust, which can result in estate tax inclusion and potential estate taxes when the beneficiary passes away, and taxed at each subsequent generation. The assets held in the trust can be used or distributed for the benefit of the family members, so the Dynasty Trust assets are not unduly restricted in a manner in which they cannot be accessed by the beneficiaries. Subject to certain restrictions, a child or family member can also be appointed to serve as Trustee of the Dynasty Trust.
Another great benefit of the Dynasty Trust is that the trust assets can provide protection from creditors of the beneficiary in the event of bankruptcies, lawsuits and divorce. Dynasty Trusts are a very common estate planning vehicle, given the benefits afforded to the family and beneficiaries, and relative ease of administration.
Contact our office to learn more about the benefits of establishing a Wyoming Dynasty Trust, or incorporating the provisions of a Wyoming Dynasty Trust into your current estate planning documents.
Wyoming Statute Section 34-1-139. Perpetuities; time limits for vesting; restrictions on selected lives; legislative intent.
- No interest in real or personal property shall be good unless it must vest not later than twenty-one (21) years after some life in being at the creation of the interest and any period of gestation involved in the situation to which the limitation applies. The lives selected to govern the time of vesting must not be so numerous nor so situated that evidence of their deaths is likely to be unreasonably difficult to obtain. It is intended by the enactment of this statute to make effective in this state the American common-law rule against perpetuities.
- Subsection (a) of this section shall not apply to a trust created after July 1, 2003 if:
- The instrument creating the trust states that the rule against perpetuities as provided in subsection (a) of this section shall not apply to the trust;
- The instrument creating the trust states that the trust shall terminate no later than one thousand (1,000) years after the trust’s creation; and
- The trust is governed by the laws of this state and the trustee maintains a place of business, administers the trust in this state or is a resident of this state.
- The election provided in subsection (b) of this section shall not be available to real property owned and held in a trust making an election under subsection (b) of this section. Subsection (a) of this section shall apply to such real property held in a trust making an election under subsection (b) of this section. Subsection (b) of this section shall apply to the remaining assets of such trust.
- Real property for the purpose of subsection (b) of this section shall not include a mineral interest or an interest in a corporation, limited liability company, partnership, business trust or other entity.