Multi-Generational Wealth
Without long-term planning, wealth can shrink at each generational transfer through estate and generation-skipping taxes. A dynasty trust, properly structured, can hold family wealth across multiple generations without estate tax at each transfer — and protect it from creditors, divorce, and erosion along the way.
What you should know
- Federal estate tax can apply at each generational level above the federal exemption. Over multiple generations, the compounding effect can significantly reduce family wealth.
- A dynasty trust is an irrevocable trust designed to hold and grow family wealth across multiple generations without being subject to estate tax at each generational transfer.
- Alabama allows dynasty trusts to last hundreds of years — long enough to cover many generations and significant flexibility.
- The Generation-Skipping Transfer (GST) tax is a separate federal tax on transfers to grandchildren and beyond. Proper allocation of the GST exemption at funding is what shields appreciation from GST tax at each later generational transfer.
- A dynasty trust can hold assets in a spendthrift structure with HEMS distribution standards, keeping wealth protected from creditors, divorce, and imprudent spending at each generation.
What it looks like for one family
The same wealth can shrink at every generation or pass largely intact — the structure is what decides.
Passed outright, generation by generation
Taxes and life events erode it
The Caldwells pass wealth to their children outright, who later pass it to their own children. At estates above the exemption, transfer taxes can take a bite at each generation — and creditors or divorces can take more.
Held in a dynasty trust
It compounds and stays protected
In a properly funded dynasty trust with the GST exemption allocated, the same wealth passes to children and grandchildren without a fresh transfer tax at each level — protected from creditors and divorce along the way.
Bob, Peggy, and the Caldwell family are a composite example used to show how the choice plays out — not a real client.
Does a dynasty trust fit your family?
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A 30-second guided quiz. Get a personal read on whether a dynasty trust fits.