Legacy Trusts: A Smart Estate Planning Strategy for Multi-Generational Wealth
Estate planning is about more than just distributing assets after death—it’s about creating a lasting legacy that provides financial security for future generations. One of the most powerful tools for this purpose is a Legacy Trust, also known as a Dynasty Trust.
This type of trust is designed to protect assets from creditors, estate taxes, and other financial risks, ensuring that wealth remains within the family for multiple generations. With evolving tax laws and increasing concerns about asset protection, understanding how a Legacy Trust works can help families make informed decisions about their financial future.
Secure your family's financial future today! Contact us at (757) 500-5135 to learn how a Legacy Trust can protect your assets for generations.
What Is a Legacy Trust?
A Legacy Trust is a type of revocable living trust that continues after the grantor’s death, benefiting children, grandchildren, and future descendants. Unlike a traditional trust, which may dissolve after a single generation, a Legacy Trust is structured to last for multiple generations, preserving wealth over time.
Key Benefits of a Legacy Trust:
Asset Protection – Shields wealth from lawsuits, divorce settlements, and creditors.
Tax Efficiency – Helps minimize estate and inheritance taxes.
Control Over Distribution – Allows you to determine how assets are passed down.
Medicaid Planning – Can prevent assets from being counted as “available resources” if a beneficiary requires nursing home care.
By incorporating a Legacy Trust into an estate plan, families can safeguard their financial future while maintaining control over how assets are managed and distributed.
Who Manages a Legacy Trust?
A trustee is responsible for overseeing the trust, ensuring that assets are managed according to the grantor’s wishes. The trustee can be:
A family member, such as a child or grandchild.
A trusted financial advisor or attorney.
A corporate trustee, such as a bank or financial institution.
The beneficiary of the trust is entitled to receive income generated by the trust assets and may also access the principal for specific needs, such as:
Health and medical expenses
Education costs
Maintenance and general living expenses
The goal is to ensure that the trust provides financial security while allowing assets to continue growing for future generations.
How Does a Legacy Trust Transfer to Future Generations?
One of the defining features of a Legacy Trust is its ability to continue beyond the initial beneficiary’s lifetime. The primary beneficiary can use their Will to determine how the trust will pass on to the next generation.
They have the option to:
Leave the trust to their children or grandchildren.
Keep the trust intact for future generations.
Provide for a spouse if they have no children.
Because the trust structure is flexible, it can be adapted over time to meet the needs of changing family dynamics.
Tax Benefits of a Legacy Trust
One of the most compelling reasons to establish a Legacy Trust is the potential for estate tax savings. The federal generation-skipping tax (GST) exemption allows individuals to pass down assets tax-free up to a certain limit.
As of 2024, this exemption is $13.61 million per individual (adjusted for inflation). This means that individuals can transfer up to this amount into a Legacy Trust without triggering additional estate taxes.
For families with larger estates, strategic planning with an estate attorney or tax professional can help minimize tax liabilities and preserve wealth.
Why Now Is the Right Time to Consider a Legacy Trust
Estate tax laws change frequently, and many experts predict potential reductions in tax exemptions in the coming years. Establishing a Legacy Trust now allows families to:
Lock in current tax benefits before future law changes.
Ensure long-term asset protection for future generations.
Maintain control over how wealth is distributed and used.
A Legacy Trust provides an effective way to secure generational wealth, ensuring that financial resources remain available for decades to come.
Have questions about estate planning? Contact us at (757) 500-5135 to schedule a consultation and start planning your lasting legacy.