Author: Michele Braverman

Assisting Clients in Decoding the Generation-Skipping Transfer Tax  

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Optimize Generational Wealth Transfers with These Insights 

Generation-Skipping Transfer Tax 101 

Many of you are likely familiar with estate and gift taxes. However, dealing with the generation-skipping transfer (GST) tax comes up less often since it usually only affects ultra-wealthy clients.   

Estate planning attorneys, financial planners, and tax advisors must understand the GST tax and learn how to avoid it to help affluent clients accomplish effective planning. Explaining the GST tax to clients is easier if you share examples of how it might impact their particular situation. It is also vital to consider unique family dynamics, financial goals, and values when recommending the best tax strategies to distribute generational wealth. 

What Is Generation-Skipping Transfer Tax? 

The government collects federal estate taxes to generate revenue when wealth is passed down to subsequent generations. When people die, they usually leave their money first to their spouses, then to their children, then to their grandchildren, and then to more distant relatives. At each passing of generational wealth, the government collects an estate tax.  

Wealthy families found a way to avoid estate tax by skipping a generation and transferring wealth directly to grandchildren and great-grandchildren, allowing them to pass down more wealth to future generations. Estate taxes were avoided when the skipped generation (in our example, the children) died because the children never owned the money or property.  

The government responded with legislation in 1976 and again in 1986, attempting to eliminate the transfer tax advantage of skipping a generation by imposing a GST tax when a skip occurs, ensuring that large estates still pay estate tax at each generation.   

The GST tax rate is currently 40 percent (the same as the highest federal estate and gift tax rate) so the tax burden on high-net-worth individuals can be substantial. Luckily, there is a GST exemption amount of $13.6 million for individuals in 2024 (the same as the federal estate and gift tax exemption) that can be used when clients want to make gifts or leave an inheritance that would otherwise be subject to the GST tax. This means that only large estates are truly impacted by the GST tax. 

Who Are the Parties Involved in a Generation-Skipping Wealth Transfer? 

There are typically three parties involved in a generation-skipping wealth transfer: 

  • The transferor: the person making the wealth transfer to an individual or a trust  
  • The skip person: the person receiving the money or property, who must be two or more generations removed from the individual making the transfer or is at least 37 ½ years younger than the transferor; a skip person may also be a trust in some instances 
  • The non-skip person or the skipped person: the generation between the individual transferring wealth and the one receiving it 

Why Should Clients Be Mindful of This Tax? 

Clients with substantial estates who are considering making sizable gifts or bequests to skip persons need to work with experienced professionals so they understand the tax consequences of these gifts or bequests, and so they can develop a strategy to properly utilize their GST tax exemption. 

The earlier you can get your client started, the better the results. It will take time and collaboration with other professionals to ensure the best possible outcome. Additionally, as with any type of estate planning, you will need to remind the client about regular reviews for updates to their plan due to changing circumstances. 

Partnering with Professionals to Align Legal and Tax Planning Strategies 

Working together, we can provide our clients with comprehensive advice, ensuring that legal, financial, and tax implications are all considered in their estate planning strategies. This will enhance the overall quality of the service and expertise your clients receive. We welcome the opportunity to partner with you to develop strategies to assist our mutual clients.

Legacy Insights: Navigating the Generation-Skipping Transfer Tax 

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Your Guide to Understanding the Generation-Skipping Transfer Tax 

Generation-Skipping Transfer Tax 101 

Many people are familiar with the existence and some aspects of estate and gift taxes. If you are part of an ultra-high-net-worth family, it is important to also understand the generation-skipping transfer (GST) tax and how it may affect your particular situation. During the planning process, it is vital to consider unique family dynamics, financial goals, and values when deciding the best tax strategies to distribute your generational wealth.  

What Is the Generation-Skipping Transfer Tax?  

The government collects federal estate taxes to generate revenue when wealth is passed down to subsequent generations. When people die, they usually leave their money first to their spouses, then to their children, then to their grandchildren, and then to more distant relatives. At each passing of generational wealth, the government collects an estate tax.    

Wealthy families found a way to avoid estate tax by skipping a generation and transferring wealth directly to grandchildren and great-grandchildren, allowing them to pass down more wealth to future generations. Estate taxes were avoided when the skipped generation (in our example, the children) died because the children never owned the money or property.    

The government responded with legislation in 1976 and again in 1986, attempting to eliminate the transfer tax advantage of skipping a generation by imposing a GST tax when a skip occurs. This ensured that large estates still paid estate tax at each generation.

The GST tax rate is currently 40 percent (the same as the highest federal estate and gift tax rate) so the tax burden on high-net-worth individuals can be substantial. Luckily, there is a GST exemption amount of $13.61 million for individuals in 2024 (the same lifetime exemption as the federal estate and gift tax exemption) that can be used when someone wants to make gifts or leave an inheritance that would otherwise be subject to the GST tax. If you have a significant estate, your family may need to use their GST tax exemption in addition to the estate and gift tax exemptions.  

Who Are the Parties Involved in a Generation-Skipping Wealth Transfer?  

There are typically three parties involved in a generation-skipping wealth transfer:  

  • The transferor: the person making the wealth transfer to an individual or a trust 
  • The skip person: the person receiving the money or property, who must be two or more generations removed from the individual making the transfer or is at least 37 ½ years younger than the transferor; a skip person may also be a trust in some instances   
  • The non-skip person or skipped person: the generation between the individual transferring wealth and the one receiving it  

Why Should You Be Mindful of This Tax?  

If you have a substantial estate and are considering making sizable gifts or bequests to skip persons, you need to work with experienced professionals to ensure that the right strategy is used to maximize your gift and minimize the tax consequences.   

The earlier you can get started, the better your results will be. It will take time and collaboration with trusted advisors to ensure the best possible outcome. After your estate plan is created, you will need regular reviews for updates due to changing circumstances.  

Professionals to Align Legal and Tax Planning Strategies  

You and your loved ones will need comprehensive advice when creating your estate plan to ensure that legal, financial, and tax implications are all considered in your estate planning strategy. We welcome the opportunity to collaborate with your existing advisors. When strategizing the best outcome for you, your loved ones, and your hard-earned money, it takes expertise from multiple areas to create the best plan possible. 

Let’s Do the Math: How Does the Generation-Skipping Transfer Tax Work? 

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You may have considered creating a trust to transfer wealth to your grandchildren and great-grandchildren. But you may not have considered how the generation-skipping transfer (GST) tax could affect this inheritance. To better explain how the tax would impact a gift in trust, we are going to take a look at some math. 

Generation-Skipping Transfer Tax Rate   

The federal GST tax rate matches the highest federal estate tax rate, currently set at 40 percent. For high-net-worth individuals, effective GST tax planning is crucial in managing combined estate, gift, and GST tax burdens.  

Generation-Skipping Transfer Tax Exemption   

You can transfer a specific value of money and property to skip persons (grandchildren, great-grandchildren, other distant relatives, someone at least 37 ½ years younger, or a trust for a skip person), either during your lifetime or after death, before triggering the GST tax. This exemption equals the federal estate and gift tax exemption amount ($13.61 million in 2024). Be aware that there is no portability for the GST tax exemption. Meaning, you will need to use it or lose it.     

Exceptions to the Generation-Skipping Transfer Tax   

You and your family members may have already established a trust. If so, certain irrevocable trusts established before September 25, 1985, are grandfathered and exempt from the GST tax provisions in Section 26.2601-1(b)(1) of the Treasury Regulations. Modifications or additions to these trusts can jeopardize the exception. Additionally, gifts for educational or medical expenses to skip persons, such as Health and Education Exclusion Trusts (HEET), are excluded from the GST tax application.  

Calculating Generation-Skipping Transfer Tax  

To understand how the GST tax will affect the inheritance you leave behind, you need to do some math. The GST tax calculation relies on an inclusion ratio, indicating the extent to which a transfer is subject to GST tax. This ratio is determined by the applicable fraction, based on the amount of your GST tax exemption. An inclusion ratio of one means the direct skip or trust is fully taxable. Any number between zero and one indicates the transfer is partially subject to GST tax.   

The amount of the GST tax exemption allocated to the transfer is divided by the value of the property involved in the transfer. The fraction is rounded to the nearest one-thousandth (.001) and looks like this:   

The next step is determining the inclusion ratio by subtracting the fraction from the number one. Depending on the ratio, the trust is either fully exempt, fully taxable, or partially taxable.   

Fully Exempt Trust  

Let’s say you create an irrevocable trust for the benefit of a grandchild and their descendants in 2024 when your entire GST tax exemption of $13,610,000 is available and you can allocate it to the trust.   

If you transfer $13,610,000 (or less) worth of accounts or property to the trust and allocate your entire GST exemption, the inclusion ratio would be zero:  

1 – (13,610,000 / 13,610,000) = 1 – 1.000 = 0  

The trust would be fully exempt from GST tax.  

Fully Taxable Trust  

Now, let’s assume that you have previously used your GST tax exemption and there was none available to allocate to your grandchild’s irrevocable trust, the inclusion ratio would be one:  

1 – (0 / 13,600,000) = 1 – 0 = 1  

The trust would be fully subject to GST tax. 

Partially Exempt Trust  

Partially exempt trusts have a portion of money or property subject to the GST tax, while another portion may qualify for an exemption.     

If you put $15,500,000 in the irrevocable trust, and your entire exemption was available, the inclusion ratio would be:  

1 – (13,610,000 / 15,500,000) = 1 – .877 = .122   

The applicable fraction is .878, and the inclusion ratio is .122. The trust would be partially subject to GST tax. When distributions are made to the grandchild, there will be a tax due. To calculate how much will be owed, we first must know what the tax rate is at the time of the distribution. For example, if the rate is 40 percent,

40 percent x .122 = 4.88 percent

If your grandchild receives a taxable distribution from the trust of $125,000, the GST tax would be $6,100.

For gifts or an inheritance left directly to the skip person, the formula works similarly, the inclusion ratio is multiplied by the GST tax in effect at the time of the transfer.

Tailoring Trusts for Success  

Working closely with your other trusted advisors, we can customize your estate plan based on your unique circumstances and goals. This also ensures compliance with federal and state tax laws, preventing a significant combined estate, gift, and GST tax burden that could diminish your family’s wealth and legacy over time.  

Let’s Do the Math: How Does the Generation-Skipping Transfer Tax Work? 

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The generation-skipping transfer (GST) tax, is a tax assessed on gifts from one person to another person in two or more generations younger, or someone who is at least 37 ½ years younger (also known as a skip person). Although not everyone will have to address this as part of their estate plan, if you have clients who are looking to make a large gift or leave a large inheritance to a skip person, it may be beneficial to see how the math works in this type of situation.

Generation-Skipping Transfer Tax Rate  

The federal GST tax rate matches the highest federal estate tax rate, currently set at 40 percent. For high-net-worth individuals, effective GST tax planning is crucial in managing combined estate, gift, and GST tax burdens. 

Generation-Skipping Transfer Tax Exemption  

Individuals can transfer a specific value of money and property to skip persons, either during their lifetime or after death, before triggering the GST tax. This exemption equals the federal estate and gift tax exemption amount ($13.61 million in 2024). Be aware, there is no portability for the GST tax exemption. Therefore, clients need to use it or they lose it.   

Exceptions to the Generation-Skipping Transfer Tax  

Your client may already have a trust. If so, certain irrevocable trusts established before September 25, 1985, are grandfathered and exempt from the GST tax provisions in section 26.2601-1(b)(1) of the Treasury Regulations. Modifications or additions to these trusts can jeopardize the exception. Additionally, gifts for educational or medical expenses to skip persons, such as health and education exclusion trusts (HEET), are excluded from GST tax application. 

Applicable Fractions and Inclusion Ratios 

To understand how the GST tax will affect your client’s estate, you need to do some math. The GST tax calculation relies on the inclusion ratio, indicating the extent to which a transfer is subject to GST tax. This ratio is determined by the applicable fraction, considering the individual’s GST tax exemption. An inclusion ratio of one means the direct skip or trust is fully taxable. Any number between zero and one indicates the transfer is partially subject to GST tax.  

The amount of the GST tax exemption allocated to the transfer is divided by the value of the property involved in the transfer. The fraction is rounded to the nearest one-thousandth (.001) and looks like this:  

The next step is determining the inclusion ratio by subtracting the fraction from the number one. Depending on the ratio, the trust is either fully exempt, fully taxable, or partially taxable.  

Fully Exempt Trust 

Let’s say your client creates an irrevocable trust for the benefit of a grandchild and their descendants in 2024, when the entire GST tax exemption of $13,610,000 is available and allocated to the trust.  

If your client transfers $13,610,000 (or less) to the trust, the inclusion ratio would be zero: 

1 – (13,610,000 / 13,610,000) = 1 – 1.000 = 0 

The trust would be fully exempt from GST tax. 

Fully Taxable Trust 

Now, let’s assume that your client had previously used their GST tax exemption and there was none available to allocate to the grandchild’s irrevocable trust, the inclusion ratio for this transfer would be one: 

1 – (0 / 13,610,000) = 1 – 0 = 1 

The trust would be fully subject to GST tax. 

Partially Exempt Trust 

Partially exempt trusts have a portion of money or property subject to the GST tax, while another portion may qualify for an exemption.    

If your client puts $15,500,000 in the irrevocable trust, and their entire exemption is available, the inclusion ratio would be: 

1 – (13,610,000 / 15,500,000) = 1 – .878 = .122  

The applicable fraction is .878, and the inclusion ratio is .122. The trust would be partially subject to GST tax. When distributions are made to the grandchild, there will be a tax due. To calculate how much will be owed, we first must know what the tax rate is at the time of the distribution. For example, if the rate is 40 percent, 

40 percent x .122 = 4.88 percent

If the grandchild receives a taxable distribution from the trust of $125,000, the GST tax would be $6,100.

For gifts or bequests made directly to the skip person, the formula works similarly, the inclusion ratio is multiplied by the GST tax rate in effect at the time of the transfer.

It Takes a Team 

We understand that the GST tax can be complicated at times. By working as a team, we can assist our clients in planning and carrying out their wishes.

What You Need to Know about the Generation-Skipping Transfer Tax Returns 

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If you have significant wealth, things like estate, gift, and generation-skipping transfer (GST) taxes need to be discussed. If you want to make a gift or leave a large inheritance to a grandchild (while your child is still alive) a more in-depth conversation surrounding the GST tax, the impact it can have on the inheritance you leave behind, and the additional steps that may occur during the administration process after your death, will be warranted. Several different returns involve the GST tax. The appropriate form that needs to be filed with the Internal Revenue Service (IRS) will depend on the situation.  

What Is Form 709?

This form would be used when a client decides to make a gift to a skip person during their lifetime. Form 709 is used to report transfers that are subject to federal gift and certain GST taxes. This also includes the allocation of lifetime GST exemption to property transferred during the transferor’s lifetime. The IRS has provided instructions for the transferor to complete the form.

What Is Form 706-GS(D-1)?

Form 706-GS(D-1) is used for trustees of a trust to report distributions from a trust to a beneficiary that are subject to the GST tax. For additional assistance, the IRS has published instructions for completing the form.

What Is Form 706-GS(D)?

Form 706-GS(D) is used for skipped persons to report tax due on distributions made from a trust to them, that is subject to the GST tax. Like the other forms from the IRS, some instructions walk through the completion of the form.

What Is Form 706-GS(T)?   

Form 706-GS(T) helps your trustee and any other entities or responsible parties to calculate GST taxes and report what is due from certain distributions and terminations subject to the generation-skipping tax. It includes instructions for tax computation and separate sections for required information for the transferor (you) and the trust.   

You and your advisors can work together to develop a detailed list of documents and information required to determine the value of the money and property transferred to your trust or given outright as a gift or part of an inheritance.  

Understanding the complex calculations when applying the GST tax, exemption amount, and any exceptions is critical. This is where professional tax advice is essential. They can calculate the amount of the GST tax exemption allocated to wealth transfers by dividing the value of the property involved in the transfer. The fraction is rounded to the nearest one-thousandth (.001) and looks like this:   

The next step is determining the inclusion ratio by subtracting the fraction from the number one. Depending on the ratio, the trust is either fully exempt, fully taxable, or partially taxable.  

Completing the Form  

To fill out the applicable forms, you need to gather a significant amount of information. Here is a list of information that may be needed:  

  • The legal name of the trust and its federal tax identification number   
  • Name and Social Security Number (SSN) or Employer Identification Number (EIN) of theindividual making the GST  
  • A list of all beneficiaries, including their names and relationships to the transferor  
  • The generation of each beneficiary in relation to the transferor (skip person or non-skip person)  
  • Name and address of the trustee(s) responsible for managing the trust  
  • A detailed list of all assets held within the trust, including values at the time of the GST 
  • Appraisals of assets to determine their fair market values  
  • Information about any other gifts or transfers made by the transferor during their lifetime that could be subject to the GST tax  
  • Indication of how the transferor’s GST tax exemption will be allocated among the trusts  
  • Allocations to skip persons, including any direct skips, indirect skips, or taxable terminations  
  • Details aboutthe transferor or any beneficiary who is deceased  
  • Copies of the trust agreement and any amendments  
  • Any legal documents relevant to the GST  
  • Specific dates of GSTs

Filing Deadlines  

Generally, these forms must be filed by April 15 of the year following the calendar year when distribution or termination occurred. Be organized and prepared throughout the year to provide accurate information. Maintaining clear records will streamline the process of completing the filing on time.    

Sailing Through Tax Season  

Working with your trusted advisors ensures accuracy and compliance with the GST tax rules. When we work together, we can provide you and your loved ones with the best possible service and help you protect the legacy you are leaving behind.  

What You Need to Know about the Generation-Skipping Transfer Tax Returns 

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If you have clients with significant wealth, things like estate, gift, and generation-skipping transfer (GST) taxes need to be discussed. If a client wishes to make a gift or leave a large inheritance to a grandchild (while their child is still alive) a more in-depth conversation surrounding the GST tax needs to be addressed. As an advisor, it can be helpful if you understand the basics of the GST tax, the impact it can have on a client’s estate plan, and additional steps that may occur during the administration process at the client’s death.    

Several different returns involve the GST tax and we will touch on a few of them in this article. The appropriate form that needs to be filed with the Internal Revenue Service (IRS) will depend on the situation.

What Is Form 709?

This form would be used when a client decides to make a gift to a skip person during their lifetime. Form 709 is used to report transfers that are subject to federal gift and certain GST taxes. This also includes the allocation of lifetime GST exemption to property transferred during the transferor’s lifetime. The IRS has provided instructions for the transferor to complete the form.

What Is Form 706-GS(D-1)?

Form 706-GS(D-1) is used for trustees of a trust to report distributions from a trust to a beneficiary that are subject to the GST tax. For additional assistance, the IRS has published instructions for completing the form.

What Is Form 706-GS(D)?

Form 706-GS(D) is used for skipped persons to report tax due on distributions made from a trust to them, that is subject to the GST tax. Like the other forms from the IRS, some instructions walk through the completion of the form.

What Is Form 706-GS(T)?  

Form 706-GS(T) is used for trustees and any other entities or responsible parties to calculate taxes and report what is due from certain distributions and trust terminations subject to the generation-skipping tax. There are instructions for tax computation and separate sections for required information for the transferor and the trust.   

You can help affluent clients create a detailed list of documents and information required to determine the value of the money and property transferred to their trust or given outright as a gift or part of an inheritance. Understanding the complex calculations is critical.  

The amount of the GST tax exemption allocated to the transfer is divided by the value of the property involved in the transfer. The fraction is rounded to the nearest one-thousandth (.001) and looks like this:  

The next step is determining the inclusion ratio by subtracting the fraction from the number one. Depending on the ratio, the trust is either fully exempt, fully taxable, or partially taxable. 

Completing the Forms 

To fill out the applicable forms, individuals need to gather a significant amount of information. Here is a list of some of the information that may be needed: 

  • The legal name of the trust and its federal tax identification number 
  • Name and Social Security Number (SSN) or Employer Identification Number (EIN) of theindividual making the GST 
  • A list of all beneficiaries, including their names and relationships to the transferor 
  • The generation of each beneficiary in relation to the transferor (skip person or non-skip person) 
  • Name and address of the trustee(s) responsible for managing the trust 
  • A detailed list of all assets held within the trust, including values at the time of the GST 
  • Appraisals of assets to determine their fair market values 
  • Information about any other gifts or transfers made by the transferor during their lifetime that could be subject to the GST tax 
  • Indication of how the transferor’s GST tax exemption will be allocated among the trusts 
  • Allocations to skip persons, including any direct skips, indirect skips, or taxable terminations 
  • Details aboutthe transferor or any beneficiary who is deceased 
  • Copies of the trust agreement and any amendments 
  • Any legal documents relevant to the GST 
  • Specific dates of GSTs 

Filing Deadlines 

Generally, these forms must be filed by April 15 of the year following the calendar year when the gift, distribution, or termination occurred. Help your client organize and prepare their information. Maintaining clear records and staying informed about any updates to tax laws will streamline the process of completing the filing on time.   

Collaborative Opportunities 

Working with other professionals outside of your area of expertise can help ensure accuracy and compliance with the GST tax rules. When we work together, we can provide the best possible service to our clients. Give us a call to learn more about ways we can collaborate.

Generational Wealth through Adoption and Dynasty Trusts

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Since a dynasty trust is mainly used to create a lasting financial legacy for multiple generations, it is structured to provide for the client’s descendants. This is a common strategy to ensure that wealth is preserved and passed down over many lifetimes and stays within the bloodline. However, if a beneficiary does not have any descendants, other family members may likely inherit. If the beneficiary would like someone else to inherit, they may consider adopting that individual so that they will be considered a descendant. 

The Rights of Adopted Children According to State Law

Under most state laws, adopted children typically have the same legal rights and privileges as biological children. Once the adoption process is complete, adopted children are treated as the biological offspring of their adoptive parents.

Adult Adoptions According to State Law

Adult adoptions are legally permitted in some jurisdictions, but the laws vary and can be very restrictive. In some places, adult adoptions may be allowed for reasons beyond familial relationships, such as inheritance or emotional bonds. 

If the state allows it, your client’s beneficiaries could consider adopting adults to ensure that a loved one receives a share of their inheritance. 

Legal Considerations 

Inconsistencies in trust language can often lead to probate and estate litigation. If a trust does not specifically address the adoption and intent, it can cause problems, as was the case in Morse v. SunTrust Bank, N.A.

In 1967, a multi-generational testamentary trust was created to provide separate subtrusts for each of the decedent’s 13 grandchildren, including any new grandchildren born before or after the grantor’s death. If a grandchild died without any descendants, their subtrust would be divided and added equally to the remaining subtrusts. The decedent did not address whether adult adoptees would be treated as descendants.

One of the decedent’s grandchildren, Molly, never had any children. In 2018, she adopted two adults, ages 34 and 36, admitting that the adoptions were for the purpose of receiving distributions from her subtrust on her death.

Other subtrust beneficiaries objected to Molly’s adopted adult beneficiaries, accusing her of fraud. A trial judge agreed, preventing Molly’s adopted adults from inheriting as descendants.

An appeals court reversed the trial judge, noting that the testamentary trust had failed to place any limits on an adult adoption. Also, Georgia’s adult adoption statute did not include any language that would prevent Molly’s adopted adults from becoming beneficiaries of her subtrust.

Adoptions and Trusts 

It is important for your client to address the potential for adoptions as part of their estate plan. They need to know how adopted individuals (adults or children) will be treated as beneficiaries according to your state law and ensure that their trust clearly expresses their wishes. A trust can contain a definition of a descendant and address the possibility that an adopted individual will become a beneficiary of the trust. Alternatively, provisions in the trust can exclude adopted individuals.

Advising Your Clients

Adoptions are not necessary to transfer your client’s own money and property to those they choose. But trust beneficiaries without children may be able to use adoption to steer trust funds to the person of their choice rather than having the money redistributed to other relatives. However, adoption can backfire if a relationship ends, leaving an outsider with a share of the family fortune or alienating family members. 

It is crucial to consult with other professionals if adoption and estate planning fall out of your scope of expertise. They help ensure that any adoption-related strategies align with state laws and regulations, which define rules for succession for adopted individuals, whether minors or adults. Trust documents should be carefully drafted to account for various scenarios and to provide clarity on how adoptions would affect the distribution of money and property within the trust.

Successful Dynasty Trusts in History: The Rockefeller Family

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Dynasty trusts have played a crucial role in preserving wealth and fostering a lasting financial legacy for many affluent families throughout history. One excellent example is the Rockefeller family, whose strategic use of dynasty trusts has made them one of the most prosperous and enduring family dynasties in the world.

Who Started It?

The Rockefeller dynasty trust was established by John D. Rockefeller, the American business magnate and philanthropist who founded the Standard Oil Company in 1870. As the wealthiest individual of his time, Rockefeller developed values and traditions to keep his family together and preserve their wealth over 150 years. In 1934, he established the family’s first trust, which laid the foundation for the creation of the dynasty trust in 1952, both managed by Chase Bank, that would protect the interest of family descendants for generations.

Standard Oil would go on to control 90 percent of US refineries and pipelines, and Rockefeller became the wealthiest man in the world and one of the first billionaires, with a family fortune valued at over $600 billion in today’s dollars. Standard Oil now operates under ExxonMobil and Chevron corporations. 

What Does the Trust Hold?

The Rockefeller dynasty trust encompasses significant and diversified assets, including equities, real estate, energy, technology, private investments, and philanthropic foundations. A strategic approach to protecting resources in trusts has allowed the family to preserve wealth and adapt to economic upheaval and fluctuating markets.

Who Benefits from It?

For over 150 years, multiple generations of Rockefeller family members have benefited from the trusts that successfully passed down wealth to support their financial literacy and education. This in turn allowed them to continue the family’s charitable pursuits in education, healthcare, business, and more.

Other Accomplishments and Philanthropic Initiatives

Beyond the financial aspects, the Rockefeller dynasty trust drives numerous philanthropic initiatives. It utilizes financial resources to encourage a sense of stewardship and philanthropy to shape the family’s financial future and guide each generation to make responsible impacts on society. The Rockefeller Foundation was established in 1913, addressing global challenges such as public health, education, scientific research, and environmental conservation, and still plays a pivotal role in shaping cultural institutions today. 

The Rockefeller Trust Continues to Be a Success

The last surviving grandchild of the Rockefeller patriarch, David Rockefeller, died at age 101 in March 2017. His oldest son, David Rockefeller Jr., 76, continues to protect the family’s financial security and philanthropy. The Rockefeller net worth is currently valued at $8.4 billion, spread out over 170 heirs. Various trusts have helped fund projects ranging from the arts to international trade.

Tips for Clients Considering a Dynasty Trust

If your clients are considering a dynasty trust, you should collaborate with other professionals to help them get started. Since setting up and funding a trust is a complex process, it could take some time to create the right strategy that aligns with financial and family goals. Clients need to understand their options to protect their assets and their family’s future.

If your client chooses to include a dynasty trust in their financial and estate planning, you can explain how this flexible tool is designed to hold, control, and distribute property over many generations. Using a dynasty trust, your client can decide how their money is going to be transferred, to whom, and when. Ask them to think about what they want for their family’s future and help them clearly articulate their goals for the next generations.

Dynasty trusts are powerful tools for those who want to provide a lasting legacy and financial security for future generations. The Rockefeller dynasty is a great example of the enduring success of well-structured and meticulously managed trusts and estate planning strategies. If you have clients who want to make a lasting impact on their families and the world, we can help.

Creating and Preserving Your Legacy with a Dynasty Trust

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What Is a Dynasty Trust and Why Should You Consider One?

If you have significant wealth, one of the best ways to protect your family and transfer your wealth is through a dynasty trust. However, setting one up requires considerable financial and estate planning knowledge. As experienced estate planning attorneys, we can explore all options available to protect your legacy and decide if a dynasty trust is right for you. 

Who Could Benefit from a Dynasty Trust?

If you have worked hard to grow your money, property, or business and want to create a lasting financial legacy for your family and future generations, creating a dynasty trust may be a great choice. Protecting your substantial wealth means addressing your specific concerns about taxes, potential creditors, lawsuits, or other financial risks while ensuring responsible management and distribution of money and property to your family. 

As a high-net-worth individual, you may need more complex estate planning strategies to achieve these goals. A successful estate plan is not just about transferring your wealth to the next generation. It is about sharing your vision for your family’s financial future along with setting certain guideposts for the management and distribution of wealth to ensure responsible financial stewardship.

How a Dynasty Trust Works

Creating and funding a dynasty trust should be done by an experienced estate planning attorney, often in collaboration with other professionals. Your team can guide you in deciding which cash, real estate, investments, or other valuable property should be transferred to the trust. You may be able to use your lifetime gift tax exemption to successfully transfer these items while minimizing tax consequences for yourself and your heirs in the future. Tax-efficient growth creates an even greater legacy for successive generations.

A dynasty trust is designed to be perpetual or of long duration. Unlike other trusts with limited or fixed termination dates, a dynasty trust will likely last for multiple generations and continue to accumulate and grow wealth over time.

A dynasty trust often involves appointing a professional trustee, such as a bank or trust company, to oversee the management and administration of the trust. They must follow specific terms and guidelines, ensuring responsible governance and distribution of money and property according to your wishes. These terms may include flexible distribution provisions to provide income to beneficiaries, an option for the trustee to make discretionary decisions based on specified criteria, or permitting the trustee to adjust distributions in response to changing family circumstances.

Why Would You Want a Dynasty Trust?

By placing money and property in a well-structured dynasty trust, you ensure that the wealth you have worked hard to accumulate remains protected within your family.

Life is unpredictable, and unforeseen circumstances, such as lawsuits, creditors, or divorces, can pose threats to your family’s financial stability. Since money and property are legally owned by the dynasty trust rather than any individual family member, they can be safeguarded from creditor claims and legal judgments in many cases. 

Estate taxes can significantly erode the wealth passed down to your heirs. Dynasty trusts are structured to minimize the impact of estate taxes over multiple generations. Additionally, the appreciation in value of trust resources while you are alive will occur outside your taxable estate, allowing for potential growth free from estate tax implications. 

Customized provisions in a dynasty trust can govern how money and property in the trust are managed and distributed. This level of control is particularly beneficial if you are concerned about a beneficiary’s financial acumen or spending habits. You can ensure that your wealth is managed responsibly while still providing for your family. 

If you have accumulated significant wealth and are looking for a way to create a lasting financial legacy for your family, we are available to discuss sophisticated estate planning tools, like dynasty trusts. By leveraging the benefits of perpetual duration, tax-efficient growth, asset protection, and responsible governance, you can address your family’s unique needs and goals over multiple generations. If you are interested in learning more about dynasty trusts and whether they are the right tool for you, give us a call.

Preserving Your Client’s Legacy with a Dynasty Trust

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What Is a Dynasty Trust and Which Clients Should Consider Them?

Advising your clients on the best ways to protect their family and wealth requires considerable financial and estate planning knowledge. Armed with this knowledge, you can help your clients explore all options available to protect their legacy. Depending on a client’s situation, a dynasty trust may be one of the options you present. 

Who Could Benefit from a Dynasty Trust?

An ideal client for a dynasty trust is typically someone with substantial wealth and a desire to create a lasting financial legacy for their family that spans multiple generations. These clients are often concerned about preserving their wealth from erosion due to taxes, potential creditors, lawsuits, or other financial risks while ensuring responsible management and distribution of their money and property. 

High-net-worth individuals may need complex estate planning strategies to achieve these goals. A successful estate plan is not just about transferring wealth to the next generation. It is about sharing their vision for their family’s financial future along with setting certain guideposts for the management and distribution of wealth to ensure responsible financial stewardship.

How a Dynasty Trust Works

Creating and funding a dynasty trust should be done by an experienced estate planning attorney along with other trusted advisors. In working together as a team, these professionals can guide the client in deciding which cash, real estate, investments, or other valuable property should be transferred to the trust. The client may be able to use their lifetime gift tax exemption to successfully transfer these items while minimizing tax consequences for themselves and their heirs in the future. Tax-efficient growth creates an even greater legacy for successive generations.

A dynasty trust is designed to be perpetual or of long duration. Unlike some other trusts that have a limited or fixed termination date, a dynasty trust will likely last for multiple generations and continue to accumulate and grow wealth over time.

A dynasty trust often involves appointing a professional trustee, such as a bank or trust company, to oversee the management and administration of the trust. They must follow specific terms and guidelines, ensuring responsible governance and distribution of resources according to your client’s wishes. These terms may include flexible distribution provisions to provide income to beneficiaries, an option for the trustee to make discretionary decisions based on specified criteria, or permitting the trustee to adjust distributions in response to changing family circumstances.

Why Would Your Client Want a Dynasty Trust?

By placing money and property in a well-structured dynasty trust, your client ensures that the wealth they have worked hard to accumulate remains protected within the family.

Life is unpredictable, and unforeseen circumstances such as lawsuits, creditors, or even divorces can pose threats to the financial stability of your client’s family. Since money and property are legally owned by the dynasty trust rather than any individual family member, they can be safeguarded from creditor claims and legal judgments in many cases. 

Estate taxes can significantly erode the wealth passed down to heirs. Dynasty trusts are structured to minimize the impact of estate taxes over multiple generations. Additionally, the appreciation in value of trust resources while the client is alive will occur outside your client’s taxable estate, allowing for potential growth free from estate tax implications. 

Customized provisions in a dynasty trust can govern how money and property in the trust are managed and distributed. This level of control is particularly beneficial when there are concerns about the financial acumen or spending habits of future generations. Your client can ensure that their wealth is managed responsibly while still providing for their heirs. 

If you have high-net-worth clients seeking to create a lasting financial legacy for their families, help them discover sophisticated planning tools like the dynasty trust. By leveraging the benefits of perpetual duration, tax-efficient growth, asset protection, and responsible governance, your clients can address the unique needs and goals of their families over multiple generations. If you are interested in learning more about dynasty trusts and how we can work together to serve your high-net-worth clients, call to schedule an appointment.