A Dynasty Trust is an irrevocable trust securing assets successively for multiple generations. A Dynasty Trust is a powerful tax-saving trust solution when properly drafted because assets transferred to the trust may avoid generation-skipping tax, estate tax, and gift tax.
Nevada trust law allows assets to remain in a Dynasty Trust for up to 365 years. Combining Nevada’s industry-leading asset protection with Nevada Dynasty Trust provisions while leveraging Nevada’s advantageous tax law makes Nevada Dynasty Trusts a very powerful estate planning solution.
Nevada does not have an estate tax. Period.
Nevada also does not have a gift tax. However, Federal Gift Tax parameters apply. Assets gifted to a Nevada Dynasty Trust would utilize a grantor’s lifetime gift tax exemption, up to $11.7mm in 2021 for individuals and $22.4mm for married couples. Once gifted to the trust, the assets are no longer subject to taxation because the trust owns the assets removing them from your and your beneficiaries’ estates.
While the assets are in a multigenerational trust, there is one owner of the assets for the timespan: the trust. Thus, the assets avoid the generation-skipping tax as well.
A Nevada Dynasty Trust as an irrevocable trust captures what many estate planning professionals regard as the most secure asset protection in the United States.
Renowned Nevada estate planning attorney, Steve Oshins, compares trust jurisdictions with his Annual Asset Protection Trust State Rankings Chart.
Nevada is one of two states with no exception creditors and the only state including divorcing spouses. Further, Nevada’s asset protection has held up in the Supreme Court of Nevada, setting precedents for asset protection and divorcing spouses hoping to pierce the trust.
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Often, grantors establish a Nevada Dynasty Trust as a discretionary trust utilizing a corporate trustee, like Crawford Trust. When drafted as a discretionary trust, the primary beneficiary may also act as a trust protector giving the authority to replace and/or remove the corporate trustee. The primary beneficiary may make investment decisions and access the assets in the trust without owning the assets.
Many think of Dynasty Trust in terms of successive legacy estate planning. It is true, Dynasty Trusts have many benefits for affluent families and can maintain family harmony while carrying out a grantor’s vision for many generations.
The tax and asset protection benefits also give peace of mind to families with net worths well below the lifetime gift tax exemption. One may argue that the tax benefit for modest families is even more remarkable as most if not all taxes will be exempt. Further, asset valuation does not impact Nevada asset protection. Assets in a properly structured Nevada trust are very challenging for creditors to acquire. So much so that many attorneys recommend settling strategies or avoiding altogether.
Peter’s construction company has flourished over the past decade. As Peter’s net worth rises closer to his lifetime gift tax exemption ($11.7mm), he is concerned about his upcoming tax liability. Further, Peter is not sure his children want to take on his company when he retires and finds it prudent to protect his legacy from creditors.
Peter’s financial advisor recommends a Nevada Asset Protection Trust with Dynasty Provisions. As a Nevada Asset Protection Trust, Peter retains control of his company while the trust now owns the company.
Upon Peter’s passing, the Nevada Asset Protection Trust converts to a Nevada Dynasty Trust with his oldest son as the Primary Beneficiary. The Dynasty Trust continues to protect the assets from potential creditors, including potential beneficiary competitors.
Peter’s son may now make decisions regarding the construction company. Suppose Peter’s son does not want to continue his interest in the company. In that case, the corporate trustee may sell the company keeping the monetary assets in the trust and retaining asset protection.
At Crawford Trust, we understand that every family is different and carries individual needs. Our experienced trust officers are happy to reach out and learn more about how we may help you.