Heckerling Conference 2023 & Dynasty Trust Considerations


By: HeirSearch.

We hope that your January has been a solid start to the new year.

HeirSearch was a proud sponsor of the 57th Heckerling Institute on Estate Planning. The conference, which ran from January 9-13 in Orlando, FL, was a huge success, solidifying its reputation as the premier conference for estate planning professionals in North America.

An annual highlight for the HeirSearch team, the Heckerling Conference was an opportunity to connect (and reconnect) with colleagues, clients, and friends across the industry. Over the week, numerous experts delivered engaging and insightful presentations which covered topics of timely interest to all attendees, providing valuable insights and knowledge across various disciplines.

One topic in particular, how to choose a jurisdiction for a multi-generational trust (or Dynasty Trust), was presented by Amy K. Kanyuk, Todd A. Flubacher, Miriam Wogan Henry, and Sarah Moore Johnson.

This month, we want to explore this idea and provide some critical considerations to keep in mind when establishing a dynasty trust. We’ll also highlight some states with the most advantageous laws to consider when selecting a trust’s jurisdiction.

What are Dynasty Trusts?

Dynasty trusts, a form of irrevocable trust, can be a powerful tool for estate planning and asset protection, particularly for individuals who wish to pass money down through the generations without being subject to gift and estate taxes.

For 2023, the individual federal estate tax exemption has increased from $12.06 million to $12.92 million. In the case of a dynasty trust, assets held in the trust are only subject to taxation–if they exceed federal maximums–when initially transferred to the trust. However, once funds are transferred to the trust, its beneficiaries can pass assets on to the next generation without being subject to estate, generation-skipping transfer (GST), or gift taxes.

Funds within a dynasty trust are protected in the following additional ways:

  1. They are considered separate from your client’s estate
  2. They are protected from a beneficiary’s creditors
  3. They are protected from disputes related to a beneficiary’s divorce/separation

Since dynasty trusts last for generations, it often makes sense to have a professional fiduciary, such as a bank or other financial institution, serve as trustee. The trustee manages and distributes the assets per the trust agreement.

What is the main downside of dynasty trusts for your client to consider? They are very inflexible. Establishing this type of trust often requires a lot of guesswork into the future needs of your client’s descendants. If their circumstance changes, you cannot refine the dynasty trust’s terms.

Location, location, location

Like in real estate or business, choosing the best jurisdiction (location) to establish the trust will be crucial to your client’s financial objectives. As the treatment of trusts varies from state to state, your clients may want to establish trusts in jurisdictions other than the one in which they live.

One key factor to consider when choosing a state in which to establish a dynasty trust is the state’s laws on perpetuities—laws that limit the time a trust can exist. Some states have more extended perpetuity periods than others, which could influence your client’s decision.

Traditionally, the rule against perpetuities states that a trust can last 21 years past the death of the last beneficiary. Some states have, however, opted out of this rule, allowing trusts to continue for many generations.

For example, states like Alaska, New Hampshire, and South Dakota have no perpetuity period, meaning a trust established in one of these states could last indefinitely. Wyoming, Nevada, and Tennessee have limits, but they are extremely generous at 1,000 years, 365 years, and 360 years respectively.

Finally, there are certain scenarios where your client may seek your advice on establishing a dynasty trust outside North America. In these circumstances, the stability of the desired country will become your top priority.

Recommend a country that has a stable and robust legal system. For example, well-developed judicial systems and highly developed anti-money laundering frameworks are strong indicators of an ideal jurisdiction to establish your clients’ dynasty trust.

Ease of doing business should also weigh heavily on your decision. Consider factors such as shared language, cultural similarities, physical accessibility, and time zones.

By taking the time to understand your client’s goals for their trust, you can choose a jurisdiction that will give them the peace of mind that their family will be cared for well past their lifetime.

Have the conversation now

It’s never too early to start the conversation about trusts and estate planning. At HeirSearch, every day, we face the frustrating complications—and expenses!—that come with intestacies and outdated wills.

By engaging with your clients early to establish an estate plan, including family trusts, you can ensure they have the necessary legal and financial tools to provide for their family’s financial needs now and for generations to come.

Do you need help establishing Heirship for trust termination?

If you’re facing a challenge identifying missing or unknown heirs of an estate or are terminating a trust, HeirSearch can help.

HeirSearch’s professional researchers identify and locate missing or unknown beneficiaries and heirs for probate and trust termination. We work exclusively with executors, administrators, trustees, fiduciaries, bank and trust officers, and their counsel to establish kinship and identify shareholders for legal purposes.

Since 1967, we’ve successfully completed tens of thousands of worldwide searches. We proudly offer no-cost, no-obligation consultations, court-ready reports, and reasonable, non-percentage-based fees.

Feel free to reach out with any questions — we look forward to connecting!

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