In the early 1900's, a handful of industrialists and entrepreneurs had amassed tremendous fortunes. John D. Rockefeller had made his name in oil, Henry Ford in automobiles, Carnegie in steel. Their estates, in today's dollars, would rival those of Bill Gates and Warren Buffett.
As these visionaries aged, most of them asked a handful of lawyers the same question: "What can I do to preserve my estate?" They knew that when they died, their estates would be heavily taxed when passing to children, and would shrink even more when going to grandchildren.
Using some of the most tax-savvy minds in the country, some of the most successful families created a separate trust... a legal entity designed to provide substantial assets to future generations, with little or no estate taxes. What they did, in the process, was create the "Dynasty Trust."
In today's tax system, estate and gift taxes are levied every time assets change hands from one generation to the next. These dynasty trusts avoided those taxes by creating a second estate that could outlive most of the family members, and continue providing for future generations.
Dynasty trusts are long-term trusts created specifically for descendants of all generations. Dynasty trusts can survive 21 years beyond the death of the last beneficiary alive when the trust was written.
If you were setting one up today, and you had a 2 year-old grandchild, your dynasty trust could last well over 100 years. Long after you're gone, a dynasty trust can distribute income and principal exactly the way you would have wanted.
The grantor's children are usually the preferred beneficiaries of a dynasty trust. After the last child dies, the grandchildren (or even great-grandchildren) become the preferred beneficiaries.
The dynasty trust, like any trust, has a trustee that controls it. The trustee can use trust income or principal for the benefit of the beneficiaries. When drafting a dynasty trust, you can determine just how narrow (or broad) the trustee's discretion is.
The dynasty trust can allow responsible beneficiaries to have complete control and access to their trust assets. For beneficiaries that are not as financially responsible, certain provisions restricting their access to trust income or principal can be incorporated into the trust.
By limiting beneficiaries' access, such "spendthrift clauses" can also prevent creditors of a beneficiary from attacking trust assets for indebtedness, or prevent the divorcing spouse of a beneficiary from laying claim to trust assets.
Starting a Dynasty Trust
Spendthrift clauses (as well as any dynasty trust) must be properly drafted by an experienced estate planning attorney. A knowledgeable attorney, who understands the grantor's situation, can also create discretionary clauses. Discretionary distributions can be conditioned on each beneficiary being able to support himself or herself on their own. With some many options, dynasty trusts can be tailored any way you choose.
The trust itself can be created during a grantor's lifetime, or a portion of the grantor's estate can be used to fund the dynasty trust at death. Creating a dynasty trust while alive allows the grantor to leverage his or her $1 million GSTT exemption. The dynasty trust will shelter not only the value of the assets transferred inside it, but also any appreciation of those assets.
Thats what the gandhi falily has done.
No, sir, love of the country is ok but family first.
