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A Dynasty Trust can enable you to provide for your children and
future generations, too. A dynasty trust holds assets without transferring direct
ownership to beneficiaries. Instead, successive generations can receive distributions
from trust assets or assets that remain held in trust, allowing for future benefit and
growth.
For transfer tax purposes, trust assets are valued at the amount they were worth when
the trust was created as long as they stay in the trust. Appreciation is generally exempt
from estate taxes.
Besides sheltering future asset appreciation from transfer taxes, creating a trust also
can benefit you with current protections and exemptions. Keep in mind, if you wish to
create a trust through your will, current exemptions and rules could change.
Since dynasty trust assets do not belong to you or your beneficiaries, assets are typically
not subject to claims by creditors. Under certain conditions, a dynasty trust can also help
avoid taxes on income and principal passed to future generations for the duration of the trust.
Your Dunham Trust Company senior trust officer can help you maximize your tax exemption when
creating a dynasty trust.
Gift taxes apply when creating a dynasty trust, but you can apply a $1 million lifetime gift
tax exemption to the assets given to the trust. Therefore, if you've funded the trust with
$1.5 million, you only pay gift taxes on the outstanding $500,000. Any gift tax you pay is
deducted from your estate, thereby reducing the amount of taxes paid at the end of your
lifetime.
Dynasty trusts are sophisticated estate planning tools that involve complicated issues of
federal tax law, as well as state trust law. Nevertheless, they provide a highly effective
way to transfer wealth to future generations with minimal tax consequences.
The information above is general in nature and not intended as legal or tax advice. Please consult with
your tax professional or attorney regarding guidance for your individual
circumstances. Dunham Trust Company recommends you authorize our senior
trust officers to work in tandem with your trusted financial professionals.
Such trusts are used to develop a vehicle for donations to a favorite charity,
which also allows for the reduction of income taxes through a charitable deduction
and favorable tax treatment at the date of the gift by non-recognition of built-in-capital gains.
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