Legacy Insights: Navigating the Generation-Skipping Transfer Tax


Creating and Preserving Your Legacy with a Dynasty Trust

Posted by Rebecca Yingst Price | Mar 18, 2024 | 0 Comments

What Is a Dynasty Trust and Why Should You Consider One? 

If you have significant wealth, one of the best ways to protect your family and transfer your wealth is through a dynasty trust. However, setting one up requires considerable financial and estate planning knowledge. As experienced estate planning attorneys, we can explore all options available to protect your legacy and decide if a dynasty trust is right for you. A dynasty trust is a type of trust that is irrevocable and that is designed to exist for multiple generations and could potentially go on indefinitely.  

A dynasty trust is structured as an irrevocable trust which means that once the trust is created and funded, the grantor relinquishes control and ownership of the assets placed within the trust. The terms of the trust, including the beneficiaries and distribution provisions, are generally permanent and cannot be altered by the grantor. This irrevocable nature is often a key feature of dynasty trusts because it helps ensure the longevity of the trust and its ability to provide for multiple generations while also offering potential estate tax benefits. 

Who Could Benefit from a Dynasty Trust? 

If you have worked hard to grow your money, property, or business and want to create a lasting financial legacy for your family and future generations, creating a dynasty trust may be a great choice. Protecting your substantial wealth means addressing your specific concerns about taxes, potential creditors, lawsuits, or other financial risks while ensuring responsible management and distribution of money and property to your family.  

As a high-net-worth individual, you may need more complex estate planning strategies to achieve these goals. A successful estate plan is not just about transferring your wealth to the next generation. It is about sharing your vision for your family's financial future along with setting certain guideposts for the management and distribution of wealth to ensure responsible financial stewardship. 

How a Dynasty Trust Works 

Creating and funding a dynasty trust should be done by an experienced estate planning attorney, often in collaboration with other professionals. Your team can guide you in deciding which cash, real estate, investments, or other valuable property should be transferred to the trust. You may be able to use your lifetime gift tax exemption to successfully transfer these items while minimizing tax consequences for yourself and your heirs in the future. Tax-efficient growth creates an even greater legacy for successive generations. 

A dynasty trust is designed to be perpetual or of long duration. Unlike other trusts with limited or fixed termination dates, a dynasty trust will likely last for multiple generations and continue to accumulate and grow wealth over time. 

A dynasty trust often involves appointing a professional trustee, such as a bank or trust company, to oversee the management and administration of the trust. They must follow specific terms and guidelines, ensuring responsible governance and distribution of money and property according to your wishes. These terms may include flexible distribution provisions to provide income to beneficiaries, an option for the trustee to make discretionary decisions based on specified criteria, or permitting the trustee to adjust distributions in response to changing family circumstances. 

Why Would You Want a Dynasty Trust? 

By placing money and property in a well-structured dynasty trust, you ensure that the wealth you have worked hard to accumulate remains protected within your family. 

Life is unpredictable, and unforeseen circumstances, such as lawsuits, creditors, or divorces, can pose threats to your family's financial stability. Since money and property are legally owned by the dynasty trust rather than any individual family member, they can be safeguarded from creditor claims and legal judgments in many cases.  

Estate taxes can significantly erode the wealth passed down to your heirs. Dynasty trusts are structured to minimize the impact of estate taxes over multiple generations. Additionally, the appreciation in value of trust resources while you are alive will occur outside your taxable estate, allowing for potential growth free from estate tax implications.  

Customized provisions in a dynasty trust can govern how money and property in the trust are managed and distributed. This level of control is particularly beneficial if you are concerned about a beneficiary's financial acumen or spending habits. You can ensure that your wealth is managed responsibly while still providing for your family.  

Successful Dynasty Trusts in History: The Rockefeller Family 

Dynasty trusts have played a crucial role in preserving wealth and fostering a lasting financial legacy for many affluent families throughout history. One excellent example is the Rockefeller family, whose strategic use of dynasty trusts has made them one of the most prosperous and enduring family dynasties in the world. 

Who Started It? 

The Rockefeller dynasty trust was established by John D. Rockefeller, the American business magnate and philanthropist who founded the Standard Oil Company in 1870.1 As the wealthiest individual of his time, Rockefeller developed values and traditions to keep his family together and preserve their wealth for over 150 years.2 In 1934, he established the family's first trust, which laid the foundation for the creation of the dynasty trust in 1952,3 both managed by Chase Bank, that would protect the interest of family descendants for generations.4 

Standard Oil would go on to control 90 percent of US refineries and pipelines, and Rockefeller became the wealthiest man in the world and one of the first billionaires.5 Standard Oil now operates under ExxonMobil and Chevron corporations.  

What Does the Trust Hold? 

The Rockefeller dynasty trust encompasses significant and diversified assets, including equities, real estate, energy, technology, private investments, and philanthropic foundations.6 A strategic approach to protecting resources in trusts has allowed the family to preserve wealth and adapt to economic upheaval and fluctuating markets. 

Who Benefits from It? 

For over 150 years, multiple generations of Rockefeller family members have benefited from the trusts that successfully passed down wealth to support their financial literacy and education.7 This in turn allowed them to continue the family's charitable pursuits in education, healthcare, business, and more.8  

Other Accomplishments and Philanthropic Initiatives 

Beyond the financial aspects, the Rockefeller dynasty trust drives numerous philanthropic initiatives. It utilizes financial resources to encourage a sense of stewardship and philanthropy to shape the family's financial future and guide each generation to make responsible impacts on society.9 The Rockefeller Foundation was established in 1913, addressing global challenges such as public health, education, scientific research, and environmental conservation, and still plays a pivotal role in shaping cultural institutions today.10  

The Rockefeller Trust Is Still a Success 

The last surviving grandchild of the Rockefeller patriarch, David Rockefeller, died at age 101 in March 2017. His oldest son, David Rockefeller Jr., 76, continues to protect the family's financial security and philanthropy. The Rockefeller net worth is currently valued at $8.4 billion, spread out over 170 heirs.11 Various trusts have helped fund projects ranging from the arts to international trade.12 

Tips When Considering a Dynasty Trust 

If you and your family are considering a dynasty trust, Ibis Legacy Law, LLC would love the opportunity to work with you and your trusted advisors. Since setting up and funding a trust is a complex process, it could take some time to create the right strategy that aligns with your goals and maximizes trust benefits. You may have multiple options to protect your estate and your family's future. Professional guidance helps determine the best possible decisions for your situation. 

A dynasty trust is a flexible estate planning tool, designed to hold, control, and distribute property over many generations. You decide how the money is transferred, to whom, and when. Think about what you want for your family's future and clearly articulate your goals to help future generations succeed. 

Dynasty trusts are powerful tools for those who want to provide both a lasting legacy and financial security for future generations. The Rockefeller dynasty trust is a testament to the enduring success of well-structured and meticulously managed trusts and estate planning strategies. If you want to make a lasting impact on your family and the world, we can help.  

If you have accumulated significant wealth and are looking for a way to create a lasting financial legacy for your family, we are available to discuss sophisticated estate planning tools, like dynasty trusts. By leveraging the benefits of perpetual duration, tax-efficient growth, asset protection, and responsible governance, you can address your family's unique needs and goals over multiple generations. If you are interested in learning more about dynasty trusts and whether they are the right tool for you, give Ibis Legacy Law, LLC a call at 216-991-6200. 

About the Author

Rebecca Yingst Price

Attorney Rebecca Yingst Price has devoted her legal career to helping families and individuals with estate planning, estate and trust administration, and residential real estate. She believes that there is no substitute for proper legal planning to protect loved ones. Ms. Price has vast experien...


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