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Avoid estate tax with a dynasty trust

On Behalf of | Nov 8, 2022 | Trust |

Dynasty trusts provide grantors in South Carolina a way to avoid the various transfer taxes that your estate may otherwise incur. But for it to work, you have to make sure you set everything up correctly on the first try.

What are dynasty trusts good for?

The big thing to know about dynasty trusts is that they’re an estate planning tool that’s built to last. While traditional trusts aren’t meant to last more than a designated number of years, a dynasty trust allows you to keep passing money down from generation to generation.

Dynasty trusts are useful for those who can afford them because it provides a legitimate way of getting around estate taxes. They have been used to help many grantors ensure that as much of their money as possible stays in their family, going to their children, grandchildren and beyond.

When you use a dynasty trust, you won’t have to pay any transfer taxes provided that the assets stay in the trust. Some of the most common transfer taxes include estate tax, gift tax and generation-skipping transfer tax (GSTT).

Things to watch out for

One potential drawback of a dynasty trust is that you can’t go back and make changes to the terms once it’s been funded. You and the beneficiaries are locked into whatever you decide.

There are limits on how much you’re allowed to put into a dynasty trust. The cap is currently set at $12.06 million, but it will rise to $12.92 million in 2023.

If you have the money for it, a dynasty trust may be something to consider. This is one example of a long-term trust that has the potential to last multiple generations and can significantly reduce your tax burden.