A dynasty trust is an estate planning tool that allows you to protect your wealth for generations to come. However, until recently, this was not really an option if you lived in Texas.
A 2021 law change now makes it possible. You can now pass on your wealth from generation to generation without incurring a transfer tax by keeping it in a trust for the next 300 years. Previously the state only allowed you to do so for 21 years.
The rule applies to trusts created after 21 September 2021, but some of those created before may still be eligible, depending on the wording of the document used to create them.
Your family might still have to pay some tax
They will still be liable for tax on any income the assets within the trust generate. You can avoid that by choosing the assets you use to store your wealth carefully. Don’t fund the trust with things that pay dividends, for example. Otherwise, your family will be taxed on those dividends.
Is there a limit to how much money I can put into a dynasty trust?
The 2022 limit for an individual is $12.06 million. It rises to $12.92 million in 2023. The payoff is that you sacrifice flexibility, which can be a drawback to this kind of trust. Once you create the trust, you or future generations cannot make changes to the terms, as dynasty trusts are irrevocable trusts.
Getting legal help to understand more about estate planning laws can help you find the best options for you and your family.