Category: Succession Planning

Dynasty Trusts: How Families Preserve Wealth Across Generations

For families who have accumulated significant assets, estate planning is often about more than simply passing property to the next generation. Many clients are also thinking about how to preserve wealth for children, grandchildren, and future generations.

One planning tool that can help achieve that goal is a dynasty trust.

While the concept may sound complex, the basic idea is straightforward: a dynasty trust is designed to hold assets for the benefit of multiple generations while minimizing transfer taxes and providing long-term asset management.

What Is a Dynasty Trust?

A dynasty trust is typically an irrevocable trust that is structured to last for many years—sometimes for multiple generations of a family.

Instead of distributing assets outright to children or grandchildren, the assets remain inside the trust, where they can continue to grow and be managed according to the terms of the trust agreement.

Beneficiaries may receive distributions for purposes such as:

  • health
  • education
  • support
  • major life events

But the trust itself continues to exist and can benefit future generations.

Why Families Use Dynasty Trusts

Dynasty trusts are often used by families who want to preserve wealth while still providing flexibility for future generations.

Several features make them attractive in long-term planning.

Multi-Generation Planning

Instead of assets being distributed outright at each generation, a dynasty trust allows wealth to remain in a structured environment that can benefit children, grandchildren, and sometimes even later generations.

This can help ensure that family wealth continues to serve its intended purpose over time.

Potential Transfer Tax Efficiency

Under current tax law, families may be able to allocate generation-skipping transfer (GST) tax exemption to certain trusts.

When structured properly, this can allow assets in the trust to grow and pass through multiple generations without being subject to additional estate or generation-skipping transfer taxes at each generational level.

Because tax laws can change, careful planning and periodic review are essential.

Professional Management and Oversight

Dynasty trusts often include provisions for trustees or trust advisors to help guide long-term investment and distribution decisions.

This can provide structure and continuity, particularly when a family’s assets include complex investments or business interests.

When Dynasty Trusts Are Often Considered

Dynasty trusts are most commonly used when families:

  • have accumulated significant investment or business assets
  • want to preserve wealth for multiple generations
  • are concerned about tax efficiency and long-term stewardship

They are often integrated into broader estate planning strategies that include lifetime gifting, grantor trusts, and coordinated trust structures.

Balancing Flexibility and Structure

One of the key considerations when creating a dynasty trust is finding the right balance between structure and flexibility.

Modern trust agreements often include provisions that allow trustees or trust advisors to adapt to changing circumstances while still preserving the long-term goals of the trust.

This flexibility can help ensure the trust continues to serve the family’s needs as circumstances evolve over time.

Long-Term Family Planning

For families thinking beyond a single generation, dynasty trusts can provide a framework for preserving wealth while supporting children, grandchildren, and future descendants. When combined with thoughtful investment management and ongoing family planning, these structures can help ensure that wealth created today continues to benefit future generations.

Estate Planning for Business Owners Before a Liquidity Event

For many business owners, the most significant financial moment of their lives is a liquidity event—such as the sale of a business, a merger, or a public offering.

These events can create substantial wealth very quickly. But they can also create significant tax exposure and estate planning challenges if planning has not been addressed in advance.

The key is that many of the most effective strategies must be implemented before the transaction occurs.

Why Timing Matters

When a business is about to be sold or undergo a major transaction, its value is often expected to increase dramatically.

If planning is done early enough, it may be possible to transfer some of that future growth to the next generation in a tax-efficient way.

Once a transaction is already underway—or once the value has already been realized—the available planning opportunities can become much more limited.

Planning With Grantor Trusts

Many advanced estate planning strategies for business owners involve the use of grantor trusts.

A grantor trust is a trust that is treated as owned by the person who created it for income tax purposes, even though the assets in the trust may be outside the grantor’s taxable estate for estate tax purposes.

This structure can create powerful planning opportunities.

Because the trust is ignored for income tax purposes:

  • Transactions between the grantor and the trust are often not treated as taxable events
  • The grantor continues to pay income tax on the trust’s income
  • The trust assets may grow outside the grantor’s estate

In effect, the grantor’s payment of the income taxes on trust assets can allow the trust to grow more efficiently for the benefit of future generations.

Strategies Often Considered Before a Liquidity Event

Depending on the situation, business owners may explore strategies such as:

  • Grantor Retained Annuity Trusts (GRATs)
  • Sales to intentionally defective grantor trusts
  • Lifetime gifting of business interests
  • Family trust structures designed to hold future appreciation

These strategies are typically designed to shift future growth in the business to trusts for children or other beneficiaries while the owner retains control or economic benefits for a period of time.

The Importance of Valuation

A critical component of planning before a liquidity event is the valuation of the business interest being transferred.

Estate planning techniques often rely on carefully documented valuations that support the value assigned to the transferred interests.

Because transactions can move quickly once negotiations begin, addressing these issues well before a sale process begins is often essential.

Coordinating Estate Planning With Transaction Planning

Estate planning should be coordinated with:

  • business attorneys
  • tax advisors
  • transaction advisors

This ensures that the estate planning strategy works alongside the broader transaction structure.

When these professionals work together early in the process, business owners often have more flexibility in structuring both the transaction and their long-term estate plan.

Planning Ahead Can Make a Meaningful Difference

For business owners and executives, the period before a liquidity event can represent one of the most important windows for estate planning.

By considering planning strategies early—before a transaction is finalized—it may be possible to transfer future growth to the next generation in a thoughtful and tax-efficient way. Reviewing these opportunities well in advance can help ensure that a successful business transition also supports long-term family planning goals.

GRATs Explained: A Strategy Many Business Owners Use to Transfer Wealth Efficiently

For individuals with significant assets—particularly business owners and executives—estate planning often involves strategies designed to transfer wealth efficiently to the next generation.

One technique that is frequently used in sophisticated estate plans is the Grantor Retained Annuity Trust, commonly called a GRAT.

While GRATs can sound complex at first, the core concept is relatively straightforward.

What Is a GRAT?

A Grantor Retained Annuity Trust (GRAT) is an irrevocable trust designed to transfer appreciation on assets to beneficiaries while potentially minimizing gift and estate taxes.

When a GRAT is created:

  1. The grantor transfers assets into the trust.
  2. The grantor retains the right to receive an annuity payment from the trust for a fixed period of time.
  3. At the end of the term, any remaining assets pass to beneficiaries, often children or trusts for their benefit.

The goal is for the assets in the trust to grow faster than the assumed IRS interest rate used when the GRAT is created.

If that happens, the excess growth can pass to beneficiaries with little or no transfer tax.

Why GRATs Are Often Used With Business Interests

GRATs are frequently used by:

  • founders
  • business owners
  • executives with concentrated equity positions

These individuals often hold assets that may experience significant growth over time.

By transferring those assets into a GRAT, the future appreciation can potentially move to the next generation while the grantor continues receiving annuity payments during the trust term.

The Importance of the GRAT Term

A key element of the strategy is the length of the trust term.

If the grantor survives the GRAT term, the remaining assets pass to beneficiaries according to the trust structure.

Because of this, many GRAT strategies use relatively short terms, sometimes implemented in a series of rolling GRATs over time.

When GRATs May Be Appropriate

A GRAT may be worth considering when someone:

  • owns assets expected to appreciate significantly
  • has already accumulated substantial wealth
  • wants to transfer value to the next generation efficiently

Common assets used in GRAT planning include:

  • closely held business interests
  • company stock
  • investment portfolios expected to grow

GRATs Are Only One Piece of the Plan

While GRATs can be powerful, they are typically used as one component of a broader estate planning strategy.

Other planning structures—such as irrevocable trusts, lifetime gifting strategies, and coordinated beneficiary designations—often work alongside GRAT planning.

Because of the technical nature of the rules governing GRATs, careful drafting and ongoing planning are essential.

Planning Ahead Matters

For business owners and executives whose wealth may continue to grow significantly, thoughtful estate planning can make a meaningful difference over time.

Strategies like GRATs are designed to address that reality by allowing future appreciation to move outside the taxable estate under the right circumstances.

For families with significant assets, reviewing planning opportunities periodically can help ensure the estate plan continues to align with long-term financial goals.

Estate Planning Checklist: Key Documents Every Family Should Have

A practical overview of the core legal documents most families should have in place to protect their assets and provide clarity for loved ones.

The Estate Planning Checklist: What Every Family Should Have in Place
Estate planning is often something people intend to do “eventually.” But the reality is that life can change quickly, and having the right legal documents in place provides peace of mind for you and protection for your family.
A well-designed estate plan does more than distribute assets after death. It can help your family avoid unnecessary court involvement, ensure someone you trust can make decisions if you become incapacitated, and provide clear instructions about your wishes.
Below is a practical checklist of the key components most families should conside

1. A Revocable Living Trust

    For many families, the foundation of an estate plan is a revocable living trust.
    A revocable trust allows you to maintain control of your assets during your lifetime while providing a clear plan for how those assets should be managed if you become incapacitated and how they should pass to beneficiaries after death.
    One major advantage is that assets held in a properly funded trust typically avoid probate, which can simplify administration for your family and maintain privacy.

    2. A Pour-Over Will

    Even if you have a revocable trust, you still need a will.
    A pour-over will works alongside your trust. If any assets are left outside the trust at death, the will directs that they be transferred into the trust so they can be distributed according to the trust’s instructions.
    This provides an additional layer of protection to ensure your overall estate plan functions as intended.

    3. Durable Power of Attorney

    Estate planning is not only about financial decisions.
    Health care documents typically include:
    • A health care power of attorney
    • A living will or advance directive
    These documents allow you to designate someone to make medical decisions on your behalf and provide guidance to physicians about your preferences for treatment in certain circumstances.

    5. Beneficiary Designations

    A durable power of attorney allows someone you trust to manage financial matters if you become unable to do so yourself.
    Without this document, your family may have to go through a court guardianship process just to handle routine financial tasks such as paying bills, managing investments, or handling property.
    Having this document in place allows someone you trust to step in immediately if needed.

    4. Health Care Documents

    Some assets pass according to beneficiary designations rather than through your will or trust.
    These often include:
    • Retirement accounts (IRAs and 401(k)s)
    • Life insurance policies
    • Certain financial accounts
    It is important to review these periodically to ensure they align with the rest of your estate plan.

    6. Planning for Minor Children

    If you have young children, one of the most important decisions is naming a guardian in your will.
    This allows you to identify who you would want to care for your children if something happened to both parents.
    You may also want to establish a trust structure to manage assets for their benefit.

    7. Periodic Review of Your Plan

    Estate plans should be reviewed periodically and after major life events such as:
    • Marriage or divorce
    • Birth of a child or grandchild
    • Significant changes in financial circumstances
    • Moving to a new state
    Even if nothing major has changed, reviewing your plan every few years helps ensure it continues to reflect your goals.

    Bringing the Pieces Together
    Estate planning is ultimately about providing clarity and protection for the people you care about.

    Having the right documents in place can make a difficult time much easier for your family and help ensure that your wishes are carried out as intended.
    If you have questions about how these elements fit together or whether your current plan still meets your needs, it may be worth Contacting Us and reviewing your documents with an experienced estate planning attorney.

    The Power of Beneficiary Designations: What Every Client Should Know

    One of the most overlooked tools in your estate plan are beneficiary designations. Here’s what you need to know about them.

    When people think of estate planning, they often picture wills and trusts – but one of the most powerful tools in your estate plan is often overlooked:  beneficiary designations. Those simple designations, tied to retirement accounts, life insurance, and even some bank accounts, can override your will and determine the direct transfer of wealth at death.  From an estate planning perspective, that makes them both incredibly useful – and potentially risky if not managed carefully.

    Why Beneficiary Designations Matter So Much?

    1. They Bypass Probate. Assets with named beneficiaries (like IRAs, 401(k)s, and life insurance) typically pass directly to those beneficiaries without going through probate. This means faster access for your loved ones and fewer legal fees.
    2. They supersede your will. Even if your will says one thing, the beneficiary form rules.
    3. They’re critical in tax planning. Designations can also affect how your heirs are taxed. For example, naming individuals as beneficiaries of a retirement account can help stretch the tax impact over 10 years, while naming your estate may accelerate taxes unnecessarily.

    Common Mistakes We See:

    • Outdated beneficiaries (especially after divorce, remarriage, or the birth of children)
    • No contingent beneficiaries listed
    • Minor children named directly (can lead to court-appointed guardianship)
    • Mismatched designations and estate planning documents
    • Failure to name a trust when appropriate (especially for special needs beneficiaries or complex family dynamics)

    What You Should Do Now?

    1. Review all beneficiary designations annually or after major life events.
    2. Coordinate designations with your overall estate plan.
    3. Consider when to name a trust as a beneficiary – for example, to manage distributions to minors or protect assets from creditors.

    Need a Beneficiary Review?

    We offer beneficiary audits as part of our estate planning services.  Whether you’re updating your old estate plan or just getting started, we’re here to help ensure your designations reflect your true wishes – and work in harmony with your plan.

    About the Author

    Hillary E. Mims
    NC State Bar Certified Paralegal

    Ensuring Your Legacy: The Importance of Takers of Last Resort in Estate Planning

    A customized estate plan provides you with peace of mind, knowing your legacy will be preserved and your beneficiaries will be cared for.

    As estate attorneys, one of the most valuable skills you can offer your clients is custom drafting that meet their unique needs and goals. In our initial planning conferences, we take the time to thoroughly discuss a variety of provisions that may be essential for your estate plan, including the inclusion of “takers of last resort.” These are individuals, organizations, or entities designated to inherit assets if no primary or secondary beneficiaries can be located. This provision is critical for clients who have complex family structures, multiple beneficiaries, or uncertain future circumstances.

    For those who may not have clear successors or wish to ensure their estate plan remains relevant as family dynamics shift, a taker of last resort provision is especially important. It allows you to have peace of mind, knowing that, in the event your intended heirs are unavailable or cannot be found, the estate will still be distributed in accordance with your wishes—rather than subject to the state’s default laws, which may not reflect your desires or intentions. By proactively including this safeguard in the trust, we can prevent the estate from becoming entangled in lengthy probate proceedings or being distributed to unintended parties. This provision ensures that the assets go where you want, even as your personal circumstances and family structure evolve over time.

    Additionally, the ability to craft specific gifts—whether monetary, real property, or sentimental items—is a crucial element of thoughtful estate planning. Many clients have particular wishes when it comes to leaving real property, businesses, or financial assets to specific individuals, whether it’s family land passed down through generations, a business venture, or a certain sum of money designated for a loved one or charitable cause. A well-drafted trust can clearly outline these specific gifts, ensuring that the client’s intent is carried out exactly as envisioned. Without clear documentation, these gifts could potentially cause confusion, disputes, or even litigation among heirs, leading to unnecessary delays, emotional stress, and financial burdens.

    When an estate plan includes well-defined specific gifts, it allows for a smoother, more organized distribution of assets. You benefit from an estate plan that not only safeguards your legacy but also reduces the potential for disagreements among heirs. This level of specialization provides a sense of security, knowing your wishes are clearly understood and your beneficiaries will receive what you intended. Ultimately, a tailored estate plan that incorporates specific gifts ensures a streamlined administration process, protecting both your desires and the interests of your beneficiaries.

    In summary, specialized estate planning, including provisions for “takers of last resort” and specific gifts, ensures that your assets are distributed according to your wishes, even in the face of changing family dynamics or unforeseen circumstances. By clearly outlining these provisions, we can help clients avoid potential disputes, reduce confusion, and streamline the estate administration process. Ultimately, a customized estate plan provides you with peace of mind, knowing your legacy will be preserved and your beneficiaries will be cared for.

    About the Author


    Emily B. Johnson
    Legal Assistant