Dynasty Trusts Let Wealthy Families Duck U.S. Estate, Gift Taxes Forever

http://www.bloomberg.com/news/2011-07-28/dynasty-trusts-let-u-s-wealthy-duck-estate-gift-taxes-forever.html

By Elizabeth Ody - Jul 28, 2011 12:32 PM ET

Jeffrey Thomasson, 52, may pass on more than $100 million to heirs using an estate-planning strategy for avoiding gift and estate taxes.

Thomasson, who lives in Indianapolis, said he’s funding a so-called dynasty trust set up in Delaware with $8 million of equity from the expanding financial advisory business he owns, Oxford Financial Group. Putting the assets in a trust, which he figures could be worth more than $100 million by the time he dies, means the money should go to his heirs without triggering federal gift, estate or generation-skipping transfer taxes.

“Why would I want to pay estate taxes on some really, really big number 30 years from now, if the IRS is giving me this opportunity?” Thomasson said.

A dynasty trust is used to pass money on to multiple generations of descendants while paying as little in taxes as possible. The trusts have no expiration date and there are no required minimum distributions, meaning their assets may grow for an unlimited number of future generations. While the trusts can be set up in many states, Delaware offers extra breaks, including stronger protection from creditors and potential exclusion of assets in divorce proceedings.

“It’s an astoundingly powerful vehicle for generating long-term family wealth,” said Neal Howard, chief fiduciary counsel for Philadelphia-based Glenmede, which manages more than $20 billion on behalf of individuals, families, endowments and foundations.


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