DYNASTY TRUSTS are long-term Trusts created specifically for descendants of multiple generations. Dynasty Trusts can last for 100 or more years. The Dynasty Trust, like any other Trust, has a Trustee that administers it. The Trustee can use Trust income or principal for the benefit of the Trust’s beneficiaries. When a qualified estate-planning attorney is drafting your Trust, you need to inform the attorney just how narrow or broad you want the Trustee’s discretion to be. The beneficiaries of your Dynasty Trust can be classified as living beneficiaries when you set up the Trust and expected future beneficiaries (i.e. great grandchildren) who can enjoy the benefits of the Trust long into the future.
The Dynasty Trust can allow responsible beneficiaries to have greater access and benefit from the assets in your Trust. Financially irresponsible beneficiaries most likely will be given less access, and the Trustee will apply strict conditions (usually referred to as “spendthrift clauses”) before the Trustee makes distributions to them. These “instructions” to the Trustee will be provided by you in the language of the Trust agreement.
By limiting Trust beneficiaries’ access, such spendthrift clauses can also prevent creditors of a beneficiary from attacking the Trust’s assets for the beneficiaries’ indebtedness, or prevent a beneficiary’s divorcing spouse from laying claim to the Trust assets.
An attractive benefit that you will receive in establishing a Dynasty Trust lies in the reduction or elimination of federal estate tax liability on your estate and on future beneficiaries’ estates.