Dynasty Trusts/Tax Planning

What solutions are there for when you want to ensure your assets last for multiple generations while losing as little money to taxes as possible? This is where dynasty trusts and tax planning come in.

Tax Planning

It is possible to plan for many generations ahead when planning the best ways to use the tax code in protecting your assets for your family. Tax planning focuses on avoiding as many transfer taxes as possible. This means planning to avoid estate taxes, gift taxes, and generation-skipping transfer taxes. Tax planning is especially powerful for Florida residents as there is no state income tax or state estate tax in Florida. This makes domicile planning and tax planning a potent combination worth investing in.

Dynasty Trusts

A dynasty trust is one of the main vessels used in tax planning. This trust can last for up to 360 years in Florida, serving a potential 18 generations to come. They do not need to last nearly this long, however. Any situation where you want your assets going to more than just the next generation may possibly benefit from a dynasty trust.

Dynasty trusts do have minimum asset thresholds to be economically efficient, but those thresholds can be reached by many moderately sized estates. They also have more flexibility than many people realize. In the state of Florida, they can be part of a revocable living trust or as part of a will. This allows you to change the terms of the trust up until the passing of the trust or will creator. For even greater flexibility, you can give the trust beneficiaries a power of appointment, allowing them to select who receives their share of the trust after their death.

A Potent Combination

Dynasty trusts often may only last up to 21 years after the death of the last living beneficiary from when the trust was created dies. Dynasty trusts are also usually taxed via income tax in most states. Neither is the case in Florida. The 360-year lifespan of the trust combined with no state income tax means that your trust will remain as tax free as possible.

As dynasty trusts last for multiple generations, administration of the trust can be left to a financial institution or law firm with a deep knowledge of Florida trust law. While we do administer trusts at Millman Law Group, our job is to secure you and your heirs’ financial situation and protect your wishes. We can help make sure anyone you pick to administer your trust has been properly advised about doing so.