Dynasty Trust: How to Leave Your Estate to Your Loved Ones (Not your In-Laws)

Dynasty Trust: How to Leave Your Estate to Your Loved Ones (Not your In-Laws) on stuartplanning.com

 By Jack Owen, Jr. Esquire, CPA, Estate Planning Attorney and CPA,  and Craig Kirsner, MBA, President of Stuart Estate Planning Wealth Advisors on stuartplanning.com


By Jack Owen, Jr. Esquire, CPA, Estate Planning Attorney and CPA,
and Craig Kirsner, MBA, President of Stuart Estate Planning Wealth Advisors

It’s possible to bequeath your assets exactly where you want them to go

 

Sometimes, we just don’t get along with our in-laws. And when it comes to leaving a financial legacy, many of us have a strong preference as to whom should gain from it. It can get complicated when your son or daughter has a spouse whom you’d rather not see benefit from your wealth. But proper estate planning can keep that money in your direct family bloodline.

Creating a dynasty trust (also known as a dynasty revocable living trust) provides a legacy model that you can count on.

Why a dynasty trust?

Dynasty trusts aren’t just different from other financial safeguards; 2018’s federal tax changes look set to make them a lot more popular among wealthier individuals. Dynasty trusts are revocable which means they are fully subject to any changes you want to make to one while you’re alive. When you pass on, that’s when the trust’s stipulations become set in stone.

“Why isn’t it good enough to simply leave a will?” you may ask. Your wishes are clearly stated, and all parties will receive your assets appropriately, right? Not exactly or always. The fact of the matter is that assets left by wills may be subject to probate: which can be a costly and time-consuming process of up to two years that can challenge your will’s validity and possibly make public your assets, heirs, and debts.

Probate and other problems we’re about to discuss can be completely avoided when you establish a dynasty trust for your heirs and transfer assets to be in the name of the trust.

The risks your wealth may face

Proper estate planning with a dynasty trust means being aware of the pitfalls which other legacy options (such as standard wills or outright distribution living trusts) pose. Under those options, your assets could be exposed to loss through your child divorcing, being transferred directly to their spouse in the event of your child’s death, or from passing to a grandchild at too young an age.

Let’s elaborate. Today’s divorce rates alone leave your legacy at a 50% risk of maldistribution. “Per stirpes” terms in legacy documents are designed to keep assets in the family tree, but even then problems can arise. Consider a situation where your son or daughter does not outlive you. “Per stirpes” designation means their share of your assets will pass to a grandchild (should they exist). In some scenarios, that means wealth can be inherited by someone between 18 and 21 years old. This is hardly the ideal age for financial responsibility!

Should your direct heirs survive you and then pass away, if your will or trust outright distributes your wealth to your heirs and then that inherited wealth will be distributed as per your son or daughter’s will/trust and not your own wishes. This will very likely result in their spouse receiving the lion’s share of the estate, if not the inheritance in its entirety.

Sometimes, our own children may even be the problem. Perhaps there’s a financially destructive habit or outstanding debt. Either way, a dynasty trust can adapt to make sure your wealth goes where and how you want it to.

How a dynasty trust circumvents these dangers

Let’s say a grandchild inherits at a young age, or an irresponsible adult child receives your wealth. Each may well squander an inheritance. A well-crafted dynasty trust can make provisions for incremental access to that inheritance over time, and perhaps even only for pre-defined purposes such as a home, a college education, medical expenses, or starting a business.

Your assets can be further safeguarded from the involvement of the courts by sidestepping probate and legal fees which can consume up to 5% of your estate’s value. Your assets can go directly to trusts designated for your blood relatives with no delay in distribution.

Should you want to exclude your child’s spouse from the distribution, you can. However, this leaves another vulnerability. Even when your child is in full control of your gifted wealth, they may still be subject to undue influence from their spouse. This could steer their financial decisions in a direction you wouldn’t want.

You would be free under a dynasty trust to name anyone you choose as a trustee who can distribute assets as per your wishes. This could be a trusted private individual or a professional service such as an attorney, bank, or brokerage firm. This designee can keep your assets safe from the influence of unfavored wives or husbands – and he or she may also offer impartial advice if your child is dealing with that kind of problem.

Let us help you explore dynasty trusts

In many ways, a dynasty trust is the ultimate in proactive financial planning. Creating one should take place with a law firm who cares about retitling your designated assets into the trust and making sure beneficiaries are exactly whom you want them to be. Stuart Estate Planning Wealth Advisors can assist you in retitling your assets to a trust.  With Florida being one of seven states with no income tax on trusts, there’s no time like the present to make sure your legacy won’t be tied up in probate or go to the wrong people.

If you’d like to get in touch, we’re here to answer all your questions!

To learn more about proper investment and estate planning, come to one of our upcoming dinner workshops at Ruth’s Chris or Abe & Louie’s steakhouse in Boca Raton or Fort Lauderdale. Call 1-800-807-5558 for details and to RSVP.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Stuart Estate Planning Wealth Advisors have not affiliated companies. Stuart Estate Planning Wealth Advisors is an independent financial services firm that creates retirement strategies using a variety of investment and insurance products. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to safety and security generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.  Stuart Estate Planning Wealth Advisors does not give legal advice.  Jack Owen, Jr., Esq., CPA is not affiliated with Stuart Estate Planning Wealth Advisors.  Jack Owen, Jr. Esq. office location: 4500 PGA Blvd., Suite 200, Palm Beach Gardens, Florida 33418. 688599

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