: 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."
'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.
Trusts are usually named after their tax identity (marital trust, dynasty trust
A dynasty trust
can be created during lifetime or upon death.