Dynasty Trusts: A Quick Summary of How the Rich Save Billions on Gratuitous Transfer Taxes

Dynasty Trusts: A Quick Summary of How the Rich Save on Gratuitous Transfer Taxes
This video presents a quick summary of dynasty trusts, which may save wealthy taxpayers millions, maybe even billions, of dollars of gratuitous transfer taxes. It discusses the differences between revocable and irrevocable trusts; how the trust document allows the grantor to exercise dead hand control over the property and its disposition; how a trust is used for estate planning, dead hand control, and to avoid the high cost and time of probate. A dynasty trust, also known as a perpetual trust or a descendants trust, is a type of trust created primarily to save on gratuitous transfer taxes over several generations while also having the other benefits of trusts, such as asset protection, probate avoidance, and dead hand control. Gratuitous transfer taxes collectively refer to estate taxes, gift taxes, and generation-skipping transfer taxes.
The main purpose of the dynasty trust is to save on gratuitous transfer taxes, equal to 40% of the property value. State law governing the trust situs determines the asset protection provided by the trust and the term limits of the trust. The situs also governs other legal requirements for the trust. Federal law governs the taxation of trusts, so estate planning to save taxes depends on federal law. The trust situs often differs from the domicile of the grantor.
The Rule Against Perpetuities limited the lifetime of trusts in many states. The Uniform Statutory Rule Against Perpetuities, which some states have adopted, permits a trust to last at least 90 years. However, many states have greatly lengthened the maximum terms of trusts, or they have eliminated the Rule Against Perpetuities entirely. According to the Pandora Papers, South Dakota has the most trusts that also holds much foreign money and other assets.

Table of Contents
00:00 Introduction
00:14 Trusts
01:32 Dynasty Trusts
07:45 Wrap-Up

Topics Covered:
Dynasty Trusts: A Quick Summary on How the Rich Save on Gratuitous Transfer Taxes
What is a Trust?
What Is an Irrevocable Trust?
Benefits of a Trust
Benefits of a Dynasty Trust
Unified Tax Credit
Form 1041, US Income Tax Return for Estates and Trusts
Dynasty Trusts Save Both Estate and Generation-Skipping Transfer Taxes
What Law Applies to Trusts?
States That Have Abolished the Rule Against Perpetuities
Number of Trusts in Some States According to the Pandora Papers
High Income Tax Rate on Trust Income
The Number of Heirs May Grow Quickly
The Law Governing Dynasty Trusts Can Change at Any Time