The Quiet Tool for Preserving Wealth for Generations

“Dynasty” describes a living trust that’s designed to provide for beneficiaries over multiple generations. Its goal is to shield assets from generation-skipping and estate taxation as a family’s wealth is passed down. Assets in a dynasty trust can remain invested for a significant time and continue to build financial value.

These trusts can be an indispensable estate planning tool, particularly for high-net-worth families and individuals. They’re constructed to remain up and running for numerous decades, allowing family wealth to grow during that time and providing ongoing financial security to beneficiaries for generations.

What Is a Dynasty Trust?

A dynasty trust is an irrevocable trust. The individual who creates an irrevocable trust, referred to as the grantor, relinquishes the right to make any changes to it after it’s set up and funded with assets.

A beneficiary can be granted “power of appointment” at the time a dynasty trust is created, however, allowing this individual to alter certain terms. The trust’s trustee or trust manager can make alterations, as well.

The grantor transfers ownership of their assets to the trust when it’s created, and this provides them with generation-skipping and estate tax relief. In other words, they can’t be taxed on something they no longer own.

Wealth generated by these assets can be shared with the trust’s beneficiaries during the dynasty trust’s existence. “The trust can distribute income to beneficiaries while the principal is preserved, asset-protected, and grows estate tax-free,” explains Asher Rubinstein, trusts and estate partner at Gallet Dreyer & Berkey in New York.

Key Features of Dynasty Trusts

Dynasty trusts provide three notable advantages.

Perpetual Duration

A dynasty trust is sometimes referred to as a perpetual trust. Some can last indefinitely, although the exact number of years depends on state law.

“Every state has its own rule against perpetuities—how long a trust can last—but many have aggressively extended these limits over the last few decades,” according to Matthew Wiley, an estate and business planning attorney licensed in Connecticut, New York, and Florida.

A dynasty trust can remain in place, dispersing its income to beneficiaries after the grantor’s death and throughout the lifetimes of its beneficiaries and those of their descendants.

Tax Advantages

Three types of taxes plague large estates: the estate tax, the gift tax during the donor’s lifetime, and the generation-skipping transfer tax. Understanding the benefits of a dynasty trust begins with understanding these taxes.

• The estate tax is imposed on an estate’s value over a certain threshold, which is adjusted annually to keep pace with inflation.

• An annual gift tax exclusion allows taxpayers to give away a certain amount per individual per year free of taxation. This limit is also adjusted for inflation. As of 2025, the limit is $19,000. Taxpayers can transfer assets during their lifetimes tax-free under this gift tax provision, and any gifts valued above the annual limit are included in the estate tax exemption at the donor’s time of death.

• The generation-skipping transfer tax is levied on gifts made to individuals who are more than one generation younger than the donor. It applies to grandchildren and any other individual who is at least 37½ years younger. It’s imposed on top of any estate or gift taxes that may also be incurred.

A dynasty trust is constructed so that the grantor’s estate, gift, and generation-skipping lifetime tax exemption are passed to the trust at the time of its formation. The estate tax due isn’t payable upon the death of beneficiaries. It is only levied when the trust eventually shuts down. Distributions to beneficiaries won’t be subject to the generation-skipping transfer tax.

“The estate tax would potentially apply at the eventual distribution of principal many generations down the line,” Rubinstein cautions, “but descendants would have many years to plan around the estate tax.”

Creditor Protection

The assets held in a dynasty trust for trust beneficiaries aren’t vulnerable to a beneficiary’s creditor claims because the trust technically owns them, even if it pays out ongoing income from them to the beneficiary. So, creditors can’t seize the assets to satisfy a beneficiary’s unpaid debts.

Other types of trusts close down when their beneficiaries attain the legal age of adulthood, often 18. A dynasty trust remains up and running regardless of the beneficiaries’ ages and can provide this creditor shield until the time of the beneficiary’s death. At that time, the decedent’s own assets are up for grabs.

Claims by lenders aren’t the only threats to a grantor’s wealth. Other entities can go after assets as well, such as healthcare providers (for unpaid medical bills), courts (imposing civil lawsuit damages), or spouses (in nasty divorces). A dynasty trust protects against all of them.

Additional Benefits of Establishing a Dynasty Trust

Beyond the features above, a dynasty trust has other benefits. For example, the grantor can set the rules and conditions under which beneficiaries receive trust income. This can prevent the trust from being emptied well before the grantor’s target date and the number of years set by state law.

The grantor can state the purposes for which income can be transferred to beneficiaries. They can create the trust to withhold distributions until certain milestones are reached, such as beneficiaries achieving college degrees or holding a job for a predetermined length of time. The grantor is giving up ownership of their assets, but they’re not giving up a say in how their generated income is used.

“A dynasty trust can shape family values,” says Wiley, “whether by limiting wasteful spending or encouraging meaningful experiences. Structured right, it can reflect a family’s ethos for generations.”

Dynasty trust incomes won’t contribute to the beneficiaries’ estates at the time of their deaths, provided that the income-producing assets remain in the trust.

Considerations and Challenges

Loss of Control

Permanently giving up ownership of one’s assets can be difficult. It’s human nature to want to control what you’ve earned, saved, and acquired. Creating a dynasty trust intended to last in perpetuity can require a certain mindset that’s focused on the future and on maintaining family wealth.

Costs

The costs associated with creating and maintaining a trust that will last through generations can be significant. They’re payable by the trust while it owns the assets that are growing in value, but they can still take a bite out of beneficiaries’ revenues.

One ongoing cost is paying the trust manager. “The trustees of dynasty trusts are usually trust companies,” says Rubinstein, “and they charge fees for their trustee services.”

The Bottom Line

Dynasty trusts may not be a consideration for those whose wealth falls neatly under the now permanent estate/gift/generation-skipping tax exemptions. You might have little to gain from establishing one if you don’t expect your estate’s value to exceed $15 million as of 2026. Furthermore, this threshold will rise incrementally each year to account for inflation.

Yet, dynasty trusts meet the wealth protection needs of many high-net-worth individuals and can be valuable estate planning tools. Speak with an estate planning attorney or a financial professional to determine whether such a trust can benefit your family.

Be sure you understand all the implications of giving up control of your wealth now for the benefit of future generations. Determine where your state stands regarding the rule against perpetuities. There may be workarounds if your state still embraces these time limits.