How would you like to pass property, tax free, from generation to generation for more than 360 years?  This can now be done using the Dynasty Trust.  The Dynasty Trust, sometimes called a Legacy Trust, was not possible until a Florida Legislative change occurred a while back. Historically, since the 1500’s in England, future interest (which are trust interest) had to vest in the new owner within lives in being plus 21 years. This was known as the Rule Against Perpetuities. That was changed by the Florida Legislature, and they now permit interest to stay open (meaning the ultimate owner is not determined) for three hundred and sixty (360) years.

This change opens the opportunity to place assets in an Irrevocable Trust for that period of time. The beneficiaries, although they have the legal capability of taking the property out of the trust, should be encouraged not to do so, because by leaving it in the trust, estate taxes, as well as generation skipping taxes can be virtually avoided for 360 years. The exception occurs when people take the property out of the trust.

There is a great deal to be said for beneficiaries who can have a college education, can run and benefit from a business, live in a house that can't be lost in a bankruptcy, divorce or litigation. They can't be lost because the trust owns these assets, rather than the beneficiaries. This particular trust can be completely or partially terminated by the beneficiaries who are their own trustees at each generational level. Property left in the trust continues to pass without estate tax.

These trusts can be funded by life insurance policies (particularly useful because of leverage), or other assets contributed to the trust. Bear in mind that anything put in this trust is in the trust for 360 years and cannot be revoked. Each spouse can set up a Legacy Trust and then serve as the other's trustee and be the original beneficiary of the trust. Therefore, assets could be accessed even though it is an Irrevocable Trust by the opposite spouse. This allows the creation of the Legacy Trust without giving up total control. 

Although this type of trust is not appropriate for all situations, it is a very powerful tool when it is appropriate.

If you have any questions or would like additional information regarding this article please write us at Firm@Scovills.com or call us at 941-365-2252.