Texas has had its fair share of family dynasties over the years – both real and on television. However, it wasn’t until less than a year ago that the law changed to allow true dynasty trusts in our state.
Texans can now set up dynasty trusts that can last for as long as 300 years. Any trust established on or after Sept. 1, 2021, can be established under the new law.
What is a dynasty trust?
These trusts (also known as “bloodline trusts”) are designed to make sure that wealth stays within the family for generations after they’re established. These trusts are largely exempt from estate and other taxes, although you have to set them up carefully if you want them to pay tax-exempt income or dividends to heirs. They can also provide protection against creditors as well as spouses in a divorce.
Dynasty trusts are irrevocable. That means they can’t be amended. Typically, since the trust is intended to continue through generations that haven’t been born yet, the person who establishes the trust names a corporate trustee like a financial institution or trust company that will provide consistent trust management over the years.
Your current dynasty trust may still work for your family
If you established Texas’ version of a dynasty trust before the new law took effect, it might still provide more than enough protection for future generations. Texas, like many other states, had a “rule against perpetuities.” Under that rule, a dynasty trust could last 21 years after the last family member alive when the trust was established dies – so easily over 100 years.
Many Texans established dynasty trusts in other states that didn’t have a rule against perpetuities. Whether you want to bring your out-of-state trust home to Texas, determine whether you can modify your current Texas trust to take advantage of the change in the law, or you haven’t yet gotten around to establishing your dynasty trust, it’s wise to seek experienced legal guidance to protect your family’s assets long after you’re gone.