The Delaware Dynasty Trust

The Delaware Dynasty TrustBecoming successful at entrepreneurship sets you up for a problem later in life: Estate Taxes. It’s easy to accept that you can’t take it with you, but you want to leave your opus intact, without the taxman taking 40% off the top. That’s a much harder thing to accomplish if you’re a wealthy entrepreneur. And I mean, really wealthy.

Success is a relative measurement. For the purpose of this review, you won’t need to be too interested in a Dynasty Trust if your estate will be $5 million dollars or less ($10 million if you’re married). The need for a dynasty trust doesn’t begin until your estate exceeds that threshold, but it becomes one of your most beneficial financial tools if you’re leaving an estate of twenty, fifty, one hundred million dollars or more.

The U.S. estate tax code has been designed from its very beginnings to heavily tax personal fortunes between generations in order to discourage family dynasties like Europe had when the 13 American colonies were forming a revolutionary government. Among the tactics used were mandatory minimum distributions, state and federal taxes on income and gains, and mandatory limitations on how long the Trust could continue to remain in existence.

The turning point came in 1986 when Congress changed the Generation-Skipping Transfer Tax (GST). Coupled with the federal shift, Delaware (and 2 other states) abolished a legal tenant known as the “Rule against Perpetuities”, the legal premise that dictates that no trust could last for generation after generation without an expiration date. Delaware also led the way by eliminating the requirement to make mandatory minimum distributions. The combination of these three developments and some really smart lawyers in Delaware lead to the Dynasty Trust.

Estate planners for the uber-wealthy love the Dynasty Trust and took to it almost immediately. It is now a standard tool to save the wealth of super successful entrepreneurs as they pass their appreciating assets on to their heirs for generations to come. Tax experts agree that the tax benefits of a Delaware Dynasty Trust are maximized when the investments are highly appreciating assets, such as the stock of a rapidly growing entrepreneurial business.

If you’re in the category where a dynasty trust will be an essential tool for spreading large wealth out over future generations, you should contact an attorney with experience in Delaware Dynasty Trusts.

Harvard Business Services, Inc. can help file Delaware dynasty trust forms on an expedited basis to make the whole process go smoothly.

*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.

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