Dynasty Trusts

Conventional wisdom holds that you will never be wealthy enough to need the complex estate planning strategies that financial planners advertise.  It is not possible to max out the lifetime limit on the annual gift tax exclusion unless you are a multimillionaire.  You have a much bigger chance of running out of money and of life before you reach the limit than of being able to give away so much money that you start owing gift taxes.  This does not mean that you do not need an estate plan; for example, it is worthwhile to set up a trust so that you can qualify for Medicaid nursing home care or so that a family member with disabilities can receive financial support from you while still remaining eligible for public benefits.  The laws about exemption from estate-related taxes change frequently, and unless Congress votes to extend the current exemptions, estates valued at more than $5 million will be subject to a 40 percent estate tax, as was the case before 2010.  If your property is valued highly enough that your estate might be responsible for paying estate taxes, contact a Bronx estate planning lawyer.

An Unattainable Dream for the Impossibly Wealthy?

You don’t have to be wealthy to establish a trust, but dynasty trusts are for people who have enough money that the next generation cannot possibly spend it all.  The dynasty trust is meant to last for generations.  With a 40 percent estate tax rate, the money can easily run out in two or three generations, but when it goes through the trust instead of through the estates of successive generations, it can last for centuries.  Some states let dynasty trusts last in perpetuity, although New York is not one of them.  Other states have a limit on the duration of dynasty trusts, but you count it in centuries, not in years or decades.

Maybe Count Your Blessings and Pay Your Taxes?

The biggest mistake you can make in estate planning, as in your peak years of earning employment income, is being bitter about not having as much money as you wish you did.  Tying yourself in knots to avoid paying taxes is a lot of work.  Remember that your family will still inherit something, and most people’s descendants will not.

Even better, ask your children about their financial values.  Perhaps they want none of the burdens of generational wealth.  In this case, a dynasty trust might be the best option, since each generation only gets so much.  Your children can inherit what they inherit, and walk away from the money if they choose to do so, and then the next generation can do the same.

Schedule a Confidential Consultation With a Bronx Estate Planning Attorney

An estate planning lawyer can answer your questions about dynasty trusts and other ways to keep assets out of probate and reduce the tax burden on your heirs.  Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.

Source:

schwab.com/learn/story/case-establishing-dynasty-trust