Generation-skipping transfer or trust

(redirected from Dynasty Trust)

Generation-skipping transfer or trust

A trust in which a principal amount is placed in a trust on the death of person A and is transferred to A's grandchildren when A's children die. The income from the trust goes to the children of person A while they survive.

Generation-Skipping Transfer or Trust

A trust into which assets are deposited and invested, but for different beneficiaries. That is, the assets of the trust are held on behalf of the grantor's grandchildren; they are divided among them when the grantor's children all die. On the other hand, income from the investment of those assets is distributed among the grantor's children. Generation-skipping trusts allow the grantor's assets to bypass estate taxes that the children would have to pay if the assets were directly transferred.
References in periodicals archive ?
Dynasty trusts: The ultrarich have been turning to a key tool -- the dynasty trust -- to take advantage of the law doubling the amount that can be passed to heirs without being subject to estate and gift taxes.
Swartz.<br />"In New Hampshire, one can create a so-called 'dynasty trust' that is perpetual and doesn't have a set termination date," he says.
South Dakota was the only pre-1986 dynasty trust state without an income tax on trusts.
Yet a third example of "making tax shelters great again," Wyden said, is the dynasty trust, which he called "a gimmick that allows the most fortunate to avoid paying estate taxes not just for a generation or two, but forever."
Dynasty trust's life insurance contract: In Estate of Morrissette, (3) the Tax Court ruled that because a dynasty trust received no additional benefit beyond that of the current life insurance protection, the trust was the deemed owner of the life insurance contract.
An alternative to a dynasty trust, for example, could be a spousal lifetime access trust.
* Limit the duration of Generation Skipping Transfer Tax-exempt Dynasty Trusts. The new budget plan proposes limiting the existence of a dynasty trust, which currently can exist perpetually, to 90 years.
The ability to make taxable lifetime gifts and generation-skipping transfers of up to $5.25 million in 2013 ($10.5 million for a married couple) will make it easier and simpler to fund a dynasty trust. For example, a married couple can use their combined $10.5 million exemption to fund a generation-skipping trust.
Also gaining traction among the wealthy, says Lapiana, are generation-skipping transfer trusts or "dynasty trusts." Unlike a traditional irrevocable trust, a dynasty trust distributes income to trust benefits for several generations while keeping the remaining trust assets outside of the beneficiaries' taxable estates, and thus free of the generation-skipping transfer (GST) tax.
Bring a life insurance funded dynasty trust into the mix and your clients can leave a legacy to generation after generation.
A dynasty trust can be created during lifetime or upon death.