How dynasty trusts work
You worked hard to build something. A dynasty trust is designed to hold it across generations — past your children, past their children — so the money keeps working for your family instead of shrinking every time it passes down.
These are the questions that matter most when you’re thinking about a dynasty trust.
What is a dynasty trust?
It’s a trust you set up once. The trust — not your child, not your grandchild — owns what you put inside it. That one detail is what lets your wealth keep moving down without being taxed, divided, or absorbed at each stop.
Knowledge check Read each statement, then tap the circle under the system it actually describes.
| Statement | Dynasty trust | Outright inheritance |
|---|---|---|
| If your child’s marriage ends, their ex typically can’t reach what’s inside the trust. | ||
| Whatever your child inherits sits in their name — reachable by a divorce, a lawsuit, or a creditor. | ||
| Your trustee runs the trust under the rules you wrote — for your children, then their children. | ||
| When your child dies, whatever they inherited is counted in their estate — and taxed again. | ||
| The trust owns what you put in it. Your child gets the benefit without owning it personally. | ||
| Each generation pays the cost of passing the wealth — estate tax, court time, lawyer time. |
0 of 6 correct.
You now understand the basics about a dynasty trust.
How does it keep wealth in the family line?
The trust owns the assets and the trustee follows your rules for who receives distributions, when, and for what purposes.
Family Trust
You add your assets to the trust.
Trustee
Your trustee follows your rules.
Your beneficiaries
Child
Grandchild
Great-grandchild
Future Generations
The assets in the dynasty trust are not personally owned by the beneficiary, so they generally cannot be accessed by third parties — even an ex-spouse.
How does it handle generation-skipping tax?
Every time wealth passes from one generation to the next, federal estate and GST tax can line up for another bite. A dynasty trust is funded once, using your generation-skipping transfer (GST) tax exemption — and after that, what grows inside the trust can move down to your grandchildren and beyond without that bite at each stop.
Knowledge check Read each statement, then tap the circle under the scenario it actually describes.
| Statement | With a dynasty trust | Without a dynasty trust |
|---|---|---|
| Each time wealth moves to the next generation, federal estate tax can take another bite. | ||
| What grows inside the trust isn’t counted in your child’s estate — or your grandchild’s. | ||
| What your grandchildren receive is smaller than what your children received. | ||
| Your grandchildren can receive what’s inside the trust without paying estate or GST tax again. | ||
| Money that compounds for decades gets taxed each time it changes hands. | ||
| You use your GST exemption one time, when you fund the trust — and the IRS doesn’t ask for it again. |
0 of 6 correct.
You now understand how a dynasty trust handles generation-skipping tax.
When does a dynasty trust make sense?
Five short choices. Brent reads your answer back to you at the end.
A 30-second guided quiz. Get a personal read on whether a dynasty trust fits.
How Brent helps you
- Looks at whether a dynasty trust fits your family’s goals before recommending one
- Drafts distribution rules that reflect how you want each generation supported
- Coordinates GST exemption allocation so the tax benefits are captured correctly
- Builds in trustee succession and trust-protector provisions for the long horizon
