Kathryn T. Joseph & Associates, Inc.

How dynasty trusts can allocate assets for future generations

With a standard trust, there is an eventual limit to how long funds from an estate can be distributed to beneficiaries. Typically, after the last beneficiary passes, that's it for distributions. For Ohio residents with significant assets looking to make their money live on indefinitely, this goal can be achieved with a dynasty trust. It's an option that may be a more appealing way to address the financial needs of heirs for multiple generations since changes were made to the tax law. 

Dynasty trusts allow wealth to passed along from one generation to the next. Part of the reason for the increased popularity of dynasty trusts is an increase in the amount that can be passed along via this type of trust without having to pay estate or gift taxes has doubled under the Tax Cuts and Jobs Act of 2017. Higher thresholds that will be applicable until 2025 may allow trust grantors to justify the administrative costs of transferring assets to a long-term trust.

Trusts, in general, allow individuals to have more control over how assets are distributed while also minimizing tax burdens. With a dynasty trust, cash, stock and other assets can be allocated in a way that distributes only certain parts of a trust to each generation while allowing the remainder of the trust to grow and mature. Capital gains taxes won't need to be paid unless those assets are sold. With careful planning, a fully funded dynasty trust could end up exceeding its value.

When there is some uncertainty about how to allocate assets for beneficiaries and future generations, an estate planning lawyer may help explain options. An attorney may also be able to recommend the type of assets that benefit from being included in a dynasty trust, such as tax-free municipal bonds and non-dividend paying stocks. Guidelines for how beneficiaries should manage trust assets can also be included in a dynasty trust.

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Kathryn T. Joseph & Associates, Inc.
Executive Commons West
29425 Chagrin Blvd.
Suite 305
Cleveland, OH 44122

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Phone: 216-245-0504
Fax: 216-765-8817
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