Long-Term Wealth Protection Available Through Dynasty Trusts and Domestic Asset Protection Trusts

Long-Term Wealth Protection Available Through Dynasty Trusts and Domestic Asset Protection Trusts

A dynasty trust can be set up and utilized to pass asserts on to multiple generations of descendants while paying very little in taxes. Here’s a big advantage: dynasty trusts have no expiration date and there are no required minimum distributions. This means the assets in the trust may grow for an unlimited number of future generations.

Dynasty trusts can be set up in numerous states. However, some states offer stronger protections for these types of trusts. For example, Delaware offers more protections from creditors trying to access the trust assets and potential exclusion of assets if a trustee gets divorced. In South Dakota, rules are in place that provide more control over investment decisions to the trustee, which makes it easier for an individual to set up their own trust company rather than rely on a bank trustee, according to Bloomberg.com.

In Virginia, there are numerous statutes in place which offer protections for individuals or families seeking long-term wealth protection. For example, Virginia replaced the common law Rule Against Perpetuities (a rule prohibiting a trust from lasting beyond 21 years after the death of the last beneficiary alive at the time the trust was created) and added a statutory rule establishing a 90-year wait-and-see period before a trust could be deemed invalid or void (see § 55-12.1, the Uniform Statutory Rule Against Perpetuities). This means a trust
created in Virginia can be structured to last for many generations.

Virginia will become the thirteenth state to permit a settlor to establish an irrevocable trust of which the settlor is a beneficiary and receive spendthrift protection against the claims of the settlor’s creditors beginning on July 1, 2012.

Recently, Virginia became the 13th state to enact Domestic Asset Trust Protection legislation. The new Virginia Code sections 55-545.03:2 and 55-545.03:3 afford protections for self-settled trusts, according to McGuireWoods.This law allows a settlor to establish an irrevocable trust where the settlor is a beneficiary and provides spendthrift protection against claims from the settlor’s creditors.

So what does all this mean? Well, it means that there are a variety of asset protection vehicles available to people who want their wealth to be protected and passed on for future generations. The type and level of protections available depend on the state in which you reside. Though, even if you live in a state that does not offer dynasty trusts or domestic asset protection legislation, you can secure an address in a more trust-friendly state to gain access to their protections. South Dakota offers this option. For example, over the past four years, the amount of money administered by South Dakota trust companies has tripled to $121 billion, almost all of it from out of state. All that has to be done is rent an address to take advantage of South Dakota’s tax-friendly trust laws.

To learn more about taking advantage of dynasty trusts and domestic asset protection laws, take the time to sit down with an experienced estate planning attorney in your area.