A person with a significant amount of wealth may wish to maximize the benefit of passing along the wealth to heirs, or they could also wish to have some control over what happens to the assets after he or she dies. Certain types of trusts, such as a dynasty trust, may be more helpful for this than the typical will. Another benefit of a trust over a will is that it aids in reducing estate taxes. For some California individuals, a dynasty trust can help them achieve their estate planning goals.
A trust prevents a single person from owning a particular asset. When the item is placed in the trust, it is owned by the trust. Then, the trustee can also set guidelines about who controls the asset and how the asset will be managed. The trust will then operate by those rules.
For those already wealthy individuals who stand to inherit the accumulated wealth of a parent, a dynasty trust can make more sense, since it will help avoid taxes by skipping a generation. Otherwise, inheriting the wealth of one’s predecessors can make the wealth vulnerable to taxation multiple times. Some states have created rules against such structures, called perpetuities, but even in those locations, individuals have options.
Reducing estate taxes weighs heavily on the minds of many wealthy California residents. Taxation and estates can be a complicated issue, and some individuals may want help. Some choose to use the services of an experienced estate planning attorney to get a better understanding of what their best options are.
Source: dairyherd.com, “A dynasty trust can save on estate taxes,” Anna-Lisa Laca, Jan. 31, 2018