Is a California dynasty trust right for your family?

On Behalf of | Jul 4, 2022 | Estate Planning |

Most people don’t think of their families as “dynasties” – even if they have a long history in this country and have accumulated significant wealth. However, if you want to ensure that the assets you’ve worked hard for or have been fortunate enough to inherit remain in your family for future generations, you may want to consider a dynasty trust.

A dynasty trust, also known as a “bloodline trust,” is designed to keep the family’s assets within the “bloodline” through generations of inheritance. These trusts have the benefit of minimizing estate taxes as well as gift and transfer taxes. They can also help protect inheritances from creditors and other third-party claims since only the trustee has control over the assets – not the beneficiaries.

Assets in a dynasty trust can be distributed to beneficiaries only under the terms set by the person who establishes the trust (the grantor). However, since dynasty trusts are irrevocable, no changes can be made to these terms.

How California law treats dynasty trusts

Some states allow dynasty trusts to continue forever, or “in perpetuity.” Most states, including California, have what’s called a “rule against perpetuities” and outline in the law how long a dynasty trust can continue.

A California dynasty trust can continue up to 21 years following the death of the last person who was alive on the date the trust was created. Say you have a newborn grandchild when you create the trust. The trust could conceivably continue for more than a century. Because these trusts are intended to outlast the current generations, many people choose a corporate trustee like a financial institution rather than name a family member as trustee and provide for successor trustees.

If you’re considering establishing a dynasty trust in California, there’s a lot more to learn about them. With sound legal guidance, you can determine whether this kind of trust aligns with your goals and, if you choose, set up one that will protect your family long after you’re gone.