An Introduction to Florida Dynasty Trusts

Florida law permits families to create “dynasty trusts.” These estate planning tools are used to preserve certain assets within your family. It is generally used for large value assets, but not always. It can also be an effective means to keep certain assets away from creditors of both born and unborn family members. If you want a long-term method to provide for family members, a dynasty trust may be a good option.

What Is a Dynasty Trust?

A dynasty trust allows family members to take periodic income from interest or principal for years to come. If it is invested properly, it can continue to grow for the life of the trust. It will benefit both born and unborn family members if appropriately established.

How Long Will a Dynasty Trust Last?

A Florida dynasty trust will last the lifetime of a designated person, plus up to 360 years. This timeframe is significant because many other states do not permit trusts to be in effect for this long. Instead, many other states cap their trusts at 21 years after the death of the last surviving beneficiary.

Can the Dynasty Trust be Changed?

A lot can happen over 360 years. Future generations may want to alter or adjust the trust so that it meets the needs of your future family members. A dynasty trust can be established so that it does not change from generation to generation, but it can also be flexible as well. Many times those who develop dynasty trusts will also include a “power of appointment.” This power allows someone else to alter how his or her share of the trust will be held or distributed upon his or her death.

How Do Taxes Come into Play with Dynasty Trusts?

A generation-skipping tax will likely affect income derived from a dynasty trust. That means that the tax is imposed every other generation. The income will be taxed at the highest possible tax rate, which is often in the 30 to 40 percent range. However, there is usually an exemption that is relatively high so that some income will not be subject to this type of tax. For the tax year 2017, the tax rate is 40%, but the exemption is $5.49 million.

Who Has Control Over the Trust?

A dynasty trust is an irrevocable trust, which means that the grantor loses control of the funds once the trust is established. Instead, he or she entrusts a trustee with the ability to distribute trust funds. Some type of procedure for determining successor trustees should also be included in the trust documents.

How Can I Learn More About Dynasty Trusts?

The best way to learn more about these types of trusts and determine if they will be a good option for you is to speak with a member of our team at The Legacy Planning Law Group. Call (904) 880-5554 today to schedule an appointment.

Written by Legacy Planning Law Group

Legacy Planning Law Group is dedicated to working with individuals and families to help protect the assets they have built throughout their life, and make everything simpler for families who have lost a loved one. We help thoughtful people achieve the peace of mind that comes with planning their personal legacy and passing on family harmony.