It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for. --Robert Kiyosaki
If you want to: (a) provide for your children and their descendants by keeping your wealth in the bloodline; (b) protect assets for future generations from creditors and divorcing spouses; and (c) save federal transfer taxes in subsequent generations, then you should consider an ongoing or lifetime trust typically called a “dynasty” trust.
What is a Dynasty Trust?
Your Revocable Living Trust may simply provide an immediate outright distribution of all trust property to your children at your death. This means that the inheritance to your child passes to him or her immediately (or until he or she reaches a certain age, such as 25 years). The disadvantage is the inheritance is now subject to whatever life circumstances your child is going through, such as divorce, creditors. In the alternative, there are many reasons to continue the trust for your children’s lifetime (and successive generations) after your death.
One of the primary reasons is that dynasty trusts may protect the inheritance passing to your children from outside influences, such as spouses or creditors, by keeping it in the bloodline for the children’s benefit and then to your grandchildren. This means that the inheritance stays in trust for your child’s lifetime for whatever they may need it for (i.e., health, education, maintenance, and support). Then when your child passes away, whatever is left in your child’s trust passes to your child’s descendants to continue in trust for their benefit.
Dynasty trusts may continue until all funds are distributed or until there are no more descendants surviving. In Florida, a Dynasty Trust can continue for up to 360 years. By doing so, Florida has effectively allowed individuals to create trusts that are ongoing to provide for future generations.
What are the Advantages?
- Protects family members against outside influences, creditors and divorcing spouses
- Guarantees children’s or grandchildren’s inheritances (keeps your wealth in the bloodline)
- Provides flexibility since the child can act as his or her own trustee of the trust and thus can manage the investment of the trust assets
- Provides investment management for your family
- Obtains very substantial tax benefits because assets continue to grow transfer tax-free - the longer the trust continues, the greater its benefits