In short
A dynasty trust is a long-term trust, often in a state that limits or has abolished the rule against perpetuities, designed to pass assets to several generations without estate, gift or generation-skipping transfer tax at each generation.
Key takeaways
- The grantor allocates generation-skipping transfer tax exemption to it.
- Beneficiaries usually get distributions at the trustee's discretion, which also protects assets from creditors.
- It is often set up as a grantor trust so it grows without paying income tax.
Where it's tested
TCP: Estate & Gift Tax Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A client's total estate is well below the $15 million exemption. The client asks whether to gift highly appreciated stock to children now or hold it until death. From a pure tax standpoint, which is generally better and why?