Dynasty Trusts
A Dynasty Trust holds assets that you would otherwise leave directly to your children. Money and other inherited assets can be lost in the event of divorce or if the child is sued. The Dynasty Trust is designed to protect such assets from creditors, divorce, and estate taxes. Your children can have virtually unlimited control over Dynasty Trust assets.
In the event of death, other documents are required to manage and ultimately to distribute the assets in your estate. These documents usually take one of two forms: 1) a revocable living trust or 2) a will. Both documents direct the distribution of your property according to your wishes, but the benefits of each must be considered in light of individual circumstances.
The Dynasty Trust
Living Examples
There has been alot of talk about the Dynasty Trust.
Recall the three major benefits of this trust:
(1) protection of inherited assets if a child gets a divorce,
(2) protection for inherited assets if the child is sued, and
(3) protection from estate taxes at the time of a child's death.
Two recent, real life examples illustrate how appropriate this trust can be.
Mrs. D and her daughter, Andrea: - protection from divorce: Mrs. D is 87 years of age with failing health. Her estate is valued at $900,000 and she has one daughter, Andrea. Andrea is in her second marriage. That marriage is not going well. Mrs. D is very concerned that her daughter, a warm, trusting, ingenuous individual, will again be divorced. Mrs. D worries deeply about Andrea's future and security. Before meeting with us, Mrs. D's trust simply provided for the distribution of her estate to her daughter. With our assistance, Andrea's inheritance will instead go into an irrevocable Dynasty Trust. If Andrea is divorced after her mother's death - and after Mrs. D's estate goes into the Dynasty Trust for Andrea's benefit - 100% of the assets are safe and secure for Andrea's well being.
Mr. T and his son, John: John is 44 years of age, well educated, single, gregarious, and a serial entrepreneur. He has made large amounts of money and lost large amounts of money. Mr. T will leave half of his $1 million estate to John, but is deeply worried that John, who has been sued twice by disgruntled partners, will again be sued and lose his inheritance. Mr. T is placing John's share of the inheritance in a Family Protection Trust. Mr. T is visibly relieved and gratified to have found an approach that will let him irrevocably protect inherited assets from litigation and for his son.
Remember, half of marriages end in divorce, and litigation in California is rampant.
The Dynasty Trust enables you to give your children the gift of financial security. It protects them from two visible and worrisome threats: divorce and litigation. We understand that you have questions about how the Dynasty Trust would be structured and how it would operate. We look forward to talking with you about it.