There is no reason why a Dynasty Trust cannot be incorporated into your individually designed Revocable Living Trust. As is the case with all revocable trusts, the planning opportunities are endless. For example, the Dynasty Trust can provide first for the care of your children and thereafter for your grandchildren and succeeding generations. If you want to prevent the possibility of having the trust assets entirely consumed by your children, you could restrict the use of trust assets by your children to only specific purposes. After the last of your children dies, the remaining trust assets could pass to individual trusts established for each of your grandchildren. This funding pattern could repeat through generations, subject only to the limits of state law on the existence of the trust. Several states have no artificial end to the length of time trusts can exist, and creation of a trust in one of these states can allow a multigenerational trust to last forever.

Apart from providing for your children and grandchildren, Dynasty Trusts can also provide them with asset protection from abusive creditors, lawsuits, and even from failed marriages. The assets generally cannot be taken by outsiders or in divorce proceedings because they are owned by the trust, not by your child or grandchild.

Additionally, as long as the Dynasty Trust does not allow the beneficiary too much access (distributions for a beneficiary’s health, education, maintenance and support are acceptable), the assets are never regarded by the IRS as being “owned” by your beneficiaries and are not taxed in their estates. This allows a terrific opportunity for the estate tax-free growth of the assets not used to take care of the beneficiaries.

To see just how powerful estate tax-free compounding of interest can be over an extended period of time, consider the following example: If trust assets grow annually at only six percent, one million dollars grows to over eighty million dollars in the seventy five years it would take for it to pass through three generations. During all of that time your descendants would have comfortable access to interest earnings and could even spend it all if needed (i.e., for a health crisis). Further, if they bought and retained assets in the name of the trust, they would always have the dual benefits of asset protection and estate tax-free growth.

Conversely, assume that your family does not create a Dynasty Trust and the one million dollars similarly grows at six percent over seventy-five years. If each generation is taxed at fifty-five percent, after seventy-five years the money will have grown to be only slightly more than seven million dollars. Using conservative numbers, over a seventy-five year period the difference between using a Dynasty Trust and not using a Dynasty Trust is about seventy-three million dollars!