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Dynasty Trust

A Dynasty Trust can enable you to provide for your children and future generations, too. A dynasty trust holds assets without transferring direct ownership to beneficiaries. Instead, successive generations can receive distributions from trust assets or assets that remain held in trust, allowing for future benefit and growth.

For transfer tax purposes, trust assets are valued at the amount they were worth when the trust was created as long as they stay in the trust. Appreciation is generally exempt from estate taxes.

Besides sheltering future asset appreciation from transfer taxes, creating a trust also can benefit you with current protections and exemptions. Keep in mind, if you wish to create a trust through your will, current exemptions and rules could change.

Since dynasty trust assets do not belong to you or your beneficiaries, assets are typically not subject to claims by creditors. Under certain conditions, a dynasty trust can also help avoid taxes on income and principal passed to future generations for the duration of the trust. Your Dunham Trust Company senior trust officer can help you maximize your tax exemption when creating a dynasty trust.

Gift taxes apply when creating a dynasty trust, but you can apply a $5,490,000 lifetime gift tax exemption (2017) to the assets given to the trust. Therefore, if you've funded the trust with $6,000,000, you pay gift taxes on the outstanding $510,000. Any gift tax you pay is deducted from your estate, thereby reducing the amount of taxes paid at the end of your lifetime.

Dynasty trusts are sophisticated estate planning tools that involve complicated issues of federal tax law, as well as state trust law. Nevertheless, they provide a highly effective way to transfer wealth to future generations with minimal tax consequences.

The information above is general in nature and not intended as legal or tax advice. Please consult with your tax professional or attorney regarding guidance for your individual circumstances. Dunham Trust Company recommends you authorize our senior trust officers to work in tandem with your trusted financial professionals.

Such trusts are used to develop a vehicle for donations to a favorite charity, which also allows for the reduction of income taxes through a charitable deduction and favorable tax treatment at the date of the gift by non-recognition of built-in-capital gains.

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