Generation-Skipping Trusts vs. Dynasty Trusts in St. Petersburg

Generation-skipping trusts and dynasty trusts are two examples of estate planning strategies designed to provide financial support for your family well into the future. Although similar in many ways, these two types of trusts represent different philosophies toward generational planning. To determine which option makes sense for your family, consider speaking with an experienced estate planning attorney in St. Petersburg.

Dynasty Trusts Last Longer Than Generation-Skipping Trusts

Generally speaking, a dynasty trust lasts longer than a generation-skipping trust (GST). This is because a dynasty trust passes assets to multiple generations of beneficiaries. In contrast, a generation-skipping trust may only pass assets to one generation a single time.

In Florida, perpetual trusts are not allowed. These are trusts that theoretically have the potential to last forever. That said, Florida places a generous 1,000-year cap on these trusts. This should be more than enough time for most families to feel confident about providing for their beneficiaries.

The Two Strategies Are Effectively Identical

While some might argue that there are a few minor differences between generation-skipping trusts and dynasty trusts, the reality is that they are both effectively the same thing. A dynasty trust also relies on generation-skipping for tax benefits, and a generation-skipping trust does not necessarily distribute assets to only one generation. A GST could theoretically continue to distribute assets to subsequent generations after skipping the first generation.

Both trusts benefit from the generation-skipping transfer (GST) tax exemption. This tax exemption can be particularly useful for high-net-worth families who face the possibility of paying federal estate taxes. With a “traditional” GST, the trust skips one generation and therefore eliminates one “round” of estate taxes. A longer-term dynasty trust might repeat this feat throughout other generations, thereby reducing or eliminating other rounds of estate tax as well.

Dynasty trusts are obviously more complex to oversee and create. This is because the grantor and their estate planning attorney must plan for and predict future generations who are not yet alive. Those who want to create ambitious trusts might have to consider how many family members will be alive a few hundred years into the future.

In contrast, traditional generation-skipping trusts may be easier and simpler to set up because their only goal is to transfer assets from the first generation (the grandparents) to the third generation (the grandchildren).

Both options should give families strong creditor protections, and the assets held within dynasty and generation-skipping trusts should continue to grow without triggering income tax.

Can a St. Petersburg Estate Planning Attorney Help Me? 

A St. Petersburg estate planning attorney may be able to help if you’re trying to decide between a generation-skipping trust and a dynasty trust. That said, there may be other options for generational planning worth considering. You can discuss the full range of options with Drude Tomori Law today. We serve clients in St. Petersburg, Lakewood Ranch, Bradenton, and Sarasota.

Sources:

 investopedia.com/terms/g/generation-skippingtrust.asp

investopedia.com/terms/d/dynasty-trust.asp