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Building a Family Legacy Trust | Benefits & Important Considerations

Also known as a Dynasty Trust, a generation-skipping Family Legacy Trust is a way to provide for your family long after you’ve passed away. The Legacy Trust is becoming increasingly popular among wealthy families, particularly because it can provide a source of income for generations to come by ensuring your most valuable assets are securely and effectively passed down to your children and grandchildren.

Because it acts as a second, separate estate, when properly implemented, the Legacy Trust has several protective benefits:

Benefits of a Family Legacy Trust

Benefit #1: Dramatic potential for growth. A trust that’s initially funded at $500,000, growing at 7% annually would be worth nearly $2 million dollars after 20 years and approximately $29 million after 60 years.

Benefit #2: Continual existence. The Legacy Trust, by design, usually includes multiple generations, ensuring that family members are taken care of well into the future, anywhere from 80 to 100 years. This also ensures that your legacy lives on through your material assets as they continue to be handed down over subsequent years.

Benefit #3: Flexibility. Because a Family Legacy Trust typically exists through multiple generations, it is designed to be flexible through changing circumstances.

Benefit 4: Protected from outsiders. If properly prepared, the trust property will be insulated from the reach of those outside it, such as your children’s creditors, claims from lawsuit victims, or a spouse in the event of a divorce.

Benefit 5: Provides steady income during your children’s lifetime. A family Legacy Trust can be used to fund college tuition as well as provide emergency money for your children and grandchildren throughout their lifetime.

Benefit #6: Avoids double taxation. Usually, family wealth is taxed at the end of each generation, which means that any assets left to your children will be taxed as part of their estate when they die, in addition to having already been taxed when you pass away. A Family Legacy trust is one way to avoid this double taxation. Because your children are the Trustees, it can pass through three generations without a single penny lost to estate taxes.

Things to Consider When Building a Family Legacy Trust

The Family Legacy Trust is called a generation-skipping trust, because it skips a generation of estate taxes when your children die, while providing them with a source of income during their lifetime. As Trustees of the trust, your children have control over the trust property, including the power to decide future trust investments. Children may also invade the trust principle for their benefit. For example, instead of purchasing a home themselves, they may choose to have the trust purchase a home for them, and they can live in it, rent-free.

Because children are the Trustees, it’s important to make sure they are well-educated to make those kinds of decisions. Also, to ensure the trust is passed down in the most favorable way possible, you should hire a knowledgeable and experienced estate planning attorney to help you draft and implement it.

In addition, keep in mind that building a family legacy is about much more than your physical wealth and material assets. Along with money and property, your values, beliefs, family traditions and experiences should be passed down to future generations, for it is in those stories that your legacy truly lives. Many would argue that non-material assets are even more important than your material ones.

Your story is a huge part of your family legacy, and we can help you start telling that story today, so that in the event you do pass away, your children and grandchildren will have immediate access to all those important memories that help keep your legacy alive.

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