|
|
 |
|
| Pay It Forward |
The Lure of Dynasty Trusts
Michael Sisk
12/01/2003
|
The dynasty trust’s ability to shield the trust’s assets from creditors—and even former family members—is another draw. In an era of rampant litigation, when nearly half of all marriages end in divorce, this becomes no small consideration.
Indeed, Herbert K. Daroff, a lawyer and financial planner in Boston, says that for most of his clients, asset protection is the most important issue. "For most of my clients, the basic premise is some variant of ‘I don’t want my daughter-in-law to get any of my money.’ Most of my clients are more or less control freaks, and the idea of controlling from the grave is even better than controlling while alive."
Scott Farber, a financial planner based in Boston, concurs: Asset protection, especially bearing on the risk of divorce, is a primary concern for his clients. Farber recalls one couple who created a dynasty trust solely because they did not trust their daughter-in-law. "When you tell a client that you can design a trust that shields their children, grandchildren, and great-grandchildren from creditors and spouses, that’s all many of them have to hear, and they say, ‘I want that.’" The value of dynasty trusts for this purpose is even more compelling, he says, because prenuptial agreements tend to lose their teeth in the eyes of a court once a couple has been married seven or 10 years.
Most estate planning techniques are designed to remove assets from a taxpayer’s estate. Dynasty trusts prevent the taxation of the assets in the estate of future generations as well. Unfortunately, Congress realized that large tax revenues were being lost by the Treasury, thanks to generation-skipping techniques such as the dynasty trusts, and in 1986 it enacted the Generation-Skipping Transfer Tax (GSTT) specifically to capture those lost dollars.
|
|
|
|
|
|
|
