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Charleston Estate Planning & Asset Protection Blog

Friday, September 28, 2018

Dynasty Trusts Explored

What are the benefits of a dynasty trust over a traditional revocable trust?


A dynasty trust is a type of irrevocable trust set up for the benefit of the trust maker’s descendants.  Dynasty trusts, also commonly referred to as generation skipping trusts or descendant’s trust, are typically created to allow wealth to flow to several generations with minimal tax consequences.  For high wealth individuals, a well drafted dynasty trust could result in your heirs receiving significant funds that would have otherwise gone to federal and state taxes. Our Charleston, South Carolina wills and trust lawyer outlines the basics of a dynasty trust and how it could benefit your family below.

Dynasty Trust Basics

A dynasty trust is usually set up with the trust creator or grantor’s children as the beneficiaries.  It can be created during the grantor’s lifetime or upon their death. Dynasty trusts formed during the grantor’s lifetime will usually prove to be more advantageous because once assets are placed within the trust, all accumulated income and appreciation of assets will be exempt from taxes.

The great benefit of a dynasty trust is its high tax exemption rate.  Assets transferred within the trust and their accumulated income will only be subject to gift, estate, or generation skipping transfer taxes when a transfer is made and the assets surpass federal tax exemptions.  Currently, the federal exemption for estate and generation skipping transfer taxes is $11.2 million through 2025.


Additional benefits to consider include the tax benefits to the grantor during his or her lifetime.  Once assets are placed within the trust, the assets and their income or appreciation will remain free from further taxation for the life of the trust for the grantor. Even further, as an irrevocable trust, assets within the dynasty trust are protected from claims of creditors.  


Despite their many benefits, dynasty trusts are not without their drawbacks.  A dynasty trust is irrevocable, meaning that it will be difficult for the grantor to make changes or dissolve the trust in the future.  As such, the grantor must have a clear understanding as to the advantages of the trust and be confident in his or her decision to transfer assets to the trust.

Additionally, it is important for the grantor to understand that assets placed within the trust will no longer be considered his or her personal funds.  There are ways in which to structure the trust so that the grantor can benefit from the trust during his or her lifetime. Contact an estate planning lawyer for more information as to your options in forming a trust to benefit your heirs for generations to come.

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Wiles Law Firm, LLC helps clients with their estate planning needs in Charleston, South Carolina and the surrounding areas such as West Ashley, Summerville, North Charleston, Mount Pleasant, and John's Island.

Information on this website is not legal advice. Further, viewing of the enclosed information does not create an attorney-client relationship with Wiles Law Firm, LLC. Matters will be handled by attorneys who primarily practice out of our office in Charleston County located at 852 Lowcountry Blvd., Ste. 101, Mt. Pleasant, SC 29464. M. Emerson Wiles, III is the attorney responsible for this advertisement.

Any result Wiles Law Firm, LLC may achieve on behalf of one client in one particular matter does not necessarily indicate similar results can be obtained for other clients. Please contact a South Carolina estate planning attorney or one of our attorneys with Wiles Law Firm, LLC for a consultation regarding your unique estate plan.



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