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Featured Article on Dynasty Trusts: Separating Fact from Fiction

Economical estate planning, creditor protection and peace of mind for HNW clients in the face of sunsetting Trump-era estate exemption limits.

Affluent families and high-net-worth clients, those with $10 million or more, are accelerating their estate planning efforts as the generous Trump-era estate exemption limit approaches its expiration in two years. IRS statistics show that in 2021, families gave away over $180 billion, more than double the amount in 2020. This trend is expected to continue in 2022 and 2023, possibly resulting in an estate planning rush in 2024 and 2025. To avoid last-minute decisions, advisors are emphasizing the importance of starting early since effective estate planning takes time and not all trusts are equally suitable.

While many wealthy couples opt for simple revocable trusts to distribute their assets in stages to their children, a more strategic approach involves establishing dynasty trusts, especially for families with over $10 million in net worth. Dynasty trusts offer several advantages, including keeping family wealth out of the tax stream for numerous generations. With careful structuring, assets can remain free from estate taxes essentially indefinitely, allowing for wealth to be passed on to great-grandchildren without the worry of estate taxes diminishing the family's wealth. Additionally, dynasty trusts provide strong creditor protection features, safeguarding assets from divorce settlements or other financial crises faced by heirs. Collaboration between financial advisors, attorneys, and family members is crucial in crafting the terms of these trusts to meet the grantors' goals effectively.


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