Why set up a dynasty trust
A dynasty trust, also known as a generation skipping trust, is a type of trust that is set up for the benefit of future generations. The purpose of a dynasty trust is to place large sums of money within the dynasty trust’s deed to be passed on to younger generations. All details of the dynasty trust must be specified within the trust deed.
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Dynasty trust explained
Depending on the country in which the dynasty trust is set up in, a dynasty trust can have a lifespan of anything up to hundreds of years. This type of trust allows the settlor to pass on assets to their grandchildren and great grandchildren, instead of their children, as in many circumstances, this particular type of trust will have a ‘life-span’.
Many high-net-worth individuals choose to set up a dynasty trust because of the financial advantages available. For example, a dynasty trust does not incur any additional gift tax, estate tax or any other form of tax. Dynasty trusts are also flexible entities that provide the safe transition and transfer of wealth from the settlor’s generation to future generations.
Furthermore, if structured correctly, a dynasty trust can be a very effective form of asset protection. Thus placing one’s wealth within a dynasty trust will be of significantly greater value because of the tax advantages available.
A dynasty trust must entail the following parties in order to be effective: a settlor, a trustee, the beneficiary/beneficiaries and a protector. The settlor is the individual responsible for the formation of the trust, whilst the trustee is responsible for administering the trust in compliance with the settlor’s wishes. The protector is responsible for supervising the administration of the trust, whilst the beneficiaries are the parties who will benefit from the formation of the trust.
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