Dynasty Trusts and the Option to Protect Your Family Fortune
When you’re making plans for your estate, you may wonder not only how you can take care of your children, but how you can plan for the financial security of generations to come. Thanks to changes in the law, Florida retirees now have the option of creating dynasty trusts that offer financial protection to succeeding generations.
Historically, Florida law employed a legal principle known as the law against perpetuities that prohibited trusts that extended forward generations. That law states that a trust could not last longer than 21 years after the death of a potential beneficiary who was alive when it was created. While a handful of states still have this law on the books, Florida has done away with the archaic rule and now allows people to create trusts that lock up their family assets for generations. In fact, Florida has embraced dynasty trusts so completely that it offers tax breaks to trust-makers and affords protection to beneficiaries who go into debt or get divorced.
Aside from planning for the financial security of your future heirs, dynasty trusts are advantageous because they allow your descendants to save on estate taxes. Whereas traditional estate law required that each generation pass their estate down individually, requiring that taxes be paid each time, dynasty trusts only incur taxes once — when the trust is created. Thereafter, beneficiaries may enjoy the trust tax-free according to its written terms. It should be noted, however, that income taxes must still be paid on any income generated by the trust. This can be handled by putting only assets that do not produce income into the trust, such as tax-free municipal bonds.
Dynasty trusts are effective at ensuring the financial security of your family for generations to come. For more information and advice on setting up a dynasty trust, speak with a skilled Florida estate planning lawyer at BaumannKangas Estate Law.