Whenever we hear the term, “Dynasty Trust Planning,” many of us think about maintaining wealth for generations of ultra high net worth families. Although the definition of “ultra high net worth” can be subject to varying definitions, most of us do agree that the number is north of $30 million of investable assets.

Trust planning of this type is designed to minimize the amount of taxes paid, predominantly estate, gift and generation-skipping taxes.In addition to tax planning, it also protects successive generations from the normal occurrences of everyday life such as divorce, bankruptcy and the occasional lawsuit. But know that in today’s environment of high federal estate exemptions, it is possible for one to leave $5.34 million federal estate tax free (per person), or $10.68 million for a married couple. As such, trust planning has taken on an even greater meaning. The true value for clients is in the creativity that an advisor may help clients understand. Trust planning is only limited by one’s imagination and not only for the ultra high net worth families.


Take, for example, a widow who desires to pass on philanthropic integrity to her children and grandchildren. The client has, for years, made gifts to varying charities and is a strong believer in tithing. In order to help her beneficiaries recognize the importance of philanthropic capital and the significance of giving back to the community, she decides to do something creative upon her death. She cares very deeply about her children and grandchildren, but may never know the next generation. She decides to pay only a certain percentage of income from the trust (not principal) to her children; however, in her trust, she stipulates that of the income the beneficiaries receive annually, a certain fixed percentage is given to the charity of their choice. By doing something creative with her planning, she is able to pass on the security of income without the burden of principal, while stressing her lifetime values. Upon the death of her children, the same stipulation exists for her grandchildren. At the last grandchild’s death, the corpus of the trust is paid to the various charities that were important to the widow during her lifetime.


Another example is a husband and wife, both former business owners. The couple have an only child who never held gainful employment for any length of time and had no interest in the family business. The son is also divorced with two children. As such, the parents sold the business and have been living comfortably.


The parents have provided a wonderful education for their son, but he has never really made an effort to provide for himself. In addition, the son is a spendthrift, not well versed in managing his financial affairs nor able to pass on the value of hard work and financial savvy.


Again, the parents love their son and grandchildren. They want to be sure that their son is provided for at their deaths, but not at the expense of inhibiting him from becoming a productive member of society. They want to consider what they can do for their son, not to him. As such, they create terms within their trust documents to pay a certain amount of income at their death per year, with additional “bumps” in income, should he prove earned income for the year. Depending upon their view of the grandchildren, they may provide the same for them.


Remember, trust planning is only limited by your imagination. Consider what you could do for your beneficiaries, rather than to them.