When creating a dynasty trust, you must first decide how to fund it. You can choose to fund the trust during your lifetime or at the time of your death. Funding it during your lifetime allows your assets to grow while you are living and keeps the appreciation out of your taxable estate. If you are certain you do not need the assets for your foreseeable lifetime expenses, this allows the trust to start growing sooner without the future appreciation being included in your estate.
Next, consider the type of funds or assets you will place into your trust. Choose asset types that have the chance to grow, such as investments. Ownership in LLC interests of an LLC that holds real property in other states is not usually the best candidate because it does not have liquidity for expenses and distributions.
You will also need to have a Delaware trust company or Delaware resident serve as a trustee. Often, this trustee job can be bifurcated into a Delaware situs trustee and an administrative trustee located elsewhere. Ideally, the administrative trustee would not be located in the state where the settlor lives.
Providing Incentives For Future Generations To Be Productive
When establishing a dynasty trust to encourage future generations to continue to work hard for their incomes, the trustee can be instructed to encourage supplemental income without spoiling beneficiaries. This type of trust allows for the creation of incentives or prerequisites for distributions. For instance, you may state that the distributions can only be made to match the beneficiary’s annual earned income or that young adults can only receive distributions if they complete an undergraduate degree. Usually, the provisions are more flexible in the discretion of the trustee.
Dynasty trusts are not as complicated as you might think to set up, as long as you make the right considerations. The Williams Law Firm can assist you with these considerations as you establish a dynasty for your family. Please note that our firm does not provide a tax or asset protection opinion with regard to this trust.
Delaware Qualified Trustee Services
If you require a Delaware Trustee, in some limited situations with which we are entirely comfortable, we can discuss alternatives such as naming a Delaware individual with limited powers and duties to maintain the Delaware situs.