Understanding Perpetual Trusts in Estate Planning
Perpetual trusts, including qualified perpetual trusts and dynasty trusts, provide a means to transfer assets to your beneficiaries through time. At Falcon Wealth Planning, we establish estate plans that will span many years or even a lifetime to protect your financial legacy.
What Is a Perpetual Trust?
A perpetual trust is a type of irrevocable trust that is intended to transfer assets to beneficiaries in perpetual succession. Other types of trusts are created to dissolve after a certain period of time or the death of the beneficiary, while a perpetual trust remains active up to the death of the last surviving beneficiary, which may be many years from now.
The main reason these trusts are created to last is that they are referred to as dynasty trusts. The principal benefit is that your assets will grow and be protected against probate, taxes, and creditors so that your money will be available to your beneficiaries in the future.
How Perpetual Trusts Operate
The process of creating a perpetual trust is simple but thoughtful:
Creating the Trust: You collaborate with an estate planning attorney to establish the trust and define your wishes. The trust becomes irrevocable once created, so you cannot change your asset selection.
Funding the Trust: You move money, investments, real estate, or business interests, etc. into the trust. When these assets are placed within the trust, they are no longer considered part of your taxable estate.
Beneficiaries and Trustee Identification: You determine which parties will benefit from the trust and select a trustee to administer and distribute the trust assets as you have prescribed.
Establishing Distribution Conditions: You have the authority to specify the method and regularity of benefits disbursed to beneficiaries. For example, you could provide for regular income payments, for instance, through monthly interest distributions, while preserving the principal for future generations.
When you develop strong distribution rules, then you can make sure the trust will remain effective and that the assets will be available to your family no matter how many generations elapse.
The advantages of perpetual trusts
Perpetual trusts provide several unique advantages:
Wealth Preservation for the Long Term: The assets that are placed in a perpetual trust may increase in value over time, free from estate or generation-skipping taxes.
Probate Prevention: Since the assets are held in the trust, they are not subject to the probate process and its public nature.
Protection against Creditors and Divorce: The assets of the trust are generally exempt from attachment or foreclosure by creditors or other spouses, thus providing protection to your family’s finances.
Customized Distribution: You can establish guidelines for the timing and amount of benefits disbursed to the beneficiaries. This can help to guarantee that the trust funds are used appropriately and only for the right purposes, such as education or health care expenses.
Important to Note
Some things you should know when setting up a perpetual trust include:
Irrevocability: Funding the trust is an irreversible process. You must be certain of your decision and the assets that you are going to put into the trust.
Long Term Commitment: Since the trust will be in force for many years, you have to strong about who is to be the trustee, how the assets are to be handled, and how the assets are to be distributed.
Legal and Tax Advice: It is important that you seek advice from legal experts in estate planning and financial consultants to ensure that your trust is properly created and will achieve your desired objectives.
Is a Perpetual Trust Appropriate for You?
If you want to create a legacy that will outlive you and at the same time protect your family’s financial security, then a perpetual trust might be the perfect solution for you. These trusts are useful for families with long-term goals because they help preserve wealth for one generation to the next and allow you to control how the assets are used.
At Falcon Wealth Planning, we are ready to assist you in determining how a perpetual trust can benefit your family. We assist you in developing a secure and appropriate estate plan that will help you achieve your future goals. Get in touch with us today to find out how you can protect your family’s financial security through a perpetual trust.
*The content in this blog is for general informational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Falcon Wealth Planning, Inc., a fee-only, true fiduciary, registered investment advisor, provides this information to give a broad understanding of financial concepts and strategies.