Dynasty Trusts for Generational Planning
Some states have modified their trust laws to either abolish the Rule Against Perpetuities, or to increased the period to into the hundreds of years so that a trust could theoretically span many generations before terminating. Trusts that take advantage of these laws are commonly known as "Dynasty Trusts".
For family planning, there may be significant advantages to the use of Dynasty Trusts to avoid estate taxes, and also to protect future heirs from creditor claims by way of the spendthrift provisions of such trusts. With so-called "Family Banks", by which no or few gifts are made to beneficiaries, but instead low interest loans are made available to family members, which must be paid back as a condition of being extended further loans. Because the beneficiaries continually repay the loans, the trust corpus is kept in tact for future generations. Additionally, the problems associated with beneficiaries gratuitously receiving large amounts of cash can be mitigated.
Note that "Family Bank" is a common nickname for a strategy which typically utilizes Dynasty Trusts, and does not involve the formation or licensing of any actual bank.
For family planning, there may be significant advantages to the use of Dynasty Trusts to avoid estate taxes, and also to protect future heirs from creditor claims by way of the spendthrift provisions of such trusts. With so-called "Family Banks", by which no or few gifts are made to beneficiaries, but instead low interest loans are made available to family members, which must be paid back as a condition of being extended further loans. Because the beneficiaries continually repay the loans, the trust corpus is kept in tact for future generations. Additionally, the problems associated with beneficiaries gratuitously receiving large amounts of cash can be mitigated.
Note that "Family Bank" is a common nickname for a strategy which typically utilizes Dynasty Trusts, and does not involve the formation or licensing of any actual bank.
Labels: asset protection, asset protection trust, dynasty trust, family bank
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