Missouri residents who have large estates may wonder how they can establish a plan that will keep their family wealthy for generations to come. A dynasty trust can do that as well as possibly saving on taxes.
With the federal estate tax exemption at $5.43 million and rising in 2016 to $5.45 million, an individual could set up a dynasty trust of $5 million using the gift tax exemption. The trust could then expand with exemptions from gift tax, estate tax and transfer tax.
This type of trust is irrevocable. The grantor gives up control of the assets and cannot make changes after the trust is established. However, the trust can protect assets in divorce and from creditors, and it can also set conditions on when family members receive income from it. For example, it might be tied to age or educational attainment. Some people choose to set up what is known as a quiet trust in which the beneficiaries are unaware of the trust until the conditions are met for it to come to them.
Another advantage of this type of trust is that multiple generations can receive income from it at the same time. A disadvantage is that family members could be tied to conditions they dislike. Such a trust could also be used to provide funds for individuals with special needs including those who are disabled.
During the estate planning process, people may wish to speak to an attorney about the best options that are available given their circumstances. In addition to wills and trusts, documents that could be appropriate might include powers of attorney that could allow a trusted individual to make health care or financial decisions on the part of an incapacitated principal.