Estate Legacy Planning: Dynasty Trusts.
Many people are worried about what to do with their accumulated wealth. There are several cases of wasteful dependents squandering the wealth of their benefactors once they come into possession of their inheritance. Because of this, a lot of people are worried about how their wealth will be spent after their deaths; they know that after they make their Wills and those same Wills are read after their demise, they cease to have control over the way their money will be spent after their death.
However, there are ways for a person to retain control of his estate/legacy even after death. Create a Dynasty Trust.
What is a Dynasty Trust?
A Dynasty Trust is a long-term Trust that is created by someone planning his/her estate specifically designed so that it can benefit multiple generations of beneficiaries. This way, the wealth can practically run in perpetuity. If and where created, the beneficiaries have no control over the Trust property/investment; they are only entitled to shares of profits in line with the instructions in the created Trust instrument.
Pertinent Facts to note about Estate Dynasty Trusts
- Multiple generations of beneficiaries can benefit from the proceeds of such a Trust as long as there are provisions about the line of beneficiaries who will keep on inheriting.
- They can outlive even the original beneficiaries/descendants of a testator and pass onto even third generation descendants, depending on the instructions enclosed in the Trust instrument.
- Trust properties can be excluded from the reach of creditors since such Trust wealth is not the particular property of a debtor/beneficiary. Thus, once a Dynasty Trust is created, the wealth infused into such Trust automatically spills out of the estate of the Trust creator and becomes a separate entity on its own. In other words, he can benefit from the Trust but he does not own the property/wealth from which he enjoys.
- Wealth can be protected from spendthrift beneficiaries who may want to sell or mismanage the Trust property. After all, they can only sell or mismanage something which is directly under their control. Unfortunately, Dynasty Trust property is not under the control of any beneficiary.
- Dynasty Trusts can be funded with any assets which the Trust owner has at his disposal as at the time of creating the Trust. However, it is worthy to note that assets which can grow over time in value are the best assets to be used for planning Dynasty Trusts. Eg: Landed property; up-growing investments, etc.
- Since Estate Dynasty Trusts are multi-generational, it is always better to get a corporate Trustee to manage the Trust on behalf of the beneficiaries. The reason is simply because corporations, unlike humans, have no expiry date. In other words, corporations exist in perpetuity and even if the original persons who had received the Dynasty Trust deed on behalf of the corporation dies, others will automatically take over and continue with the administration of the Trust estate.
Preservation of Family Wealth through Dynasty Trusts
If, when, and where such a Trust is created, it will automatically serve to preserve the wealth which a person has accumulated in his lifetime. To this effect, no particular child or beneficiary of the creator of the Trust can lay hold of any property designated as part of the Dynasty Trust as his own personal property. So, even if a beneficiary wants to sell, use, or otherwise want to give out property which is the subject of an estate Dynasty Trust, they can’t. The property will remain tied up for however long the Trust creator wants it to be (this will be done subject to the laws against perpetuity in the state of the Trust creator because no Trust can really run in perpetuity; the Common Law rule against perpetuity). so, if a person wants to preserve wealth for multiple generations, then Dynasty Trusts would be the ideal answer to achieve this.
How Long Can An Estate Legacy Trust last?
Generally, such a Trust, if and where created in the course of the estate planning by a person, cannot last forever. The reason is because of the Common Law Rule against Perpetuity. Nothing created under the Common (English) Law (for Common Law practitioners), can last forever. It must have a specific duration, and this may be influenced by the applicable laws of the jurisdiction where the Trust is being created.
Generally, where this Trust is created, it will end twenty years after the death of the last beneficiary of the original Trust. Or, it can be any other term, the point being that the properties must become disposable after the passage of a certain period of time. But, depending on jurisdiction and relaxation of policies, a Trust can last for a period of up to three hundred years after the death of the creator of the Trust instrument. Terms of the Trust will be instrumental in making this so.
Should I consider such a Trust?
If you want to leave a legacy for your future generations, not just properties, then the answer is yes. The reason is because of its long-term applicability as against properties bequeathed to beneficiaries in a Will instrument of which ownership passes to the beneficiaries who can then use the properties in the way they deem fit.
Who can create an Estate Dynasty Trust for me?
In order to get such a Trust, it is pertinent to hire an estate attorney who has the legal and technical know-how to handle the crafting of a Dynasty Trust that will encompass the vision of the settlor leaving the legacy for his family.
Things to Note in Dynasty Trust creation
- A seasoned estate attorney
- A knowledge of applicable laws
- The Trust itself
- Terms of the Trust couched in such a way as to maximize the time for the enjoyment of the Trust interests before they become alienable.
- The Trustee to be appointed (in most cases this is usually assets management companies or perhaps any firm with expertise in handling wealth). As aforementioned, it is better to appoint a corporate trustee over a individual person.
- Trust manager
- The beneficiaries and the chain to be followed after the death of the original beneficiaries to the Trust.
If you want to expand your legacy, then a Dynasty Trust may be just the right instrument that can bring that plan to light. It is one of the major factors a wealthy estate owner can easily consider when planning the dissolution of his estate subsequently.
© by Kingsley Ugochukwu Ani L.P. All Rights Reserved. This article is meant for personal/academic purposes, not commercial use by the readers.
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