William S. Lenker, CRSP

Asset Protection

Trust planning can play an important part in protecting a client’s assets, and with proper planning people can protect the assets they have now as well as any inheritance they receive, or leave to loved ones, in the future. As litigation becomes more prevalent, and divorce becomes more common, people are looking for ways to organize their affairs and plan their estates in a way that will protect the assets they have worked hard to accumulate. Stories of lawsuits, divorce, and spendthrift children and grandchildren are becoming so widespread that people no longer believe that “it will never happen to my family.” While most jurisdictions provide some protection for beneficiaries of trusts, South Dakota statutes go even further, incorporating spendthrift clauses and stricter creditor protection. Several types of trusts make use of South Dakota’s advantageous trust and tax laws. South Dakota has modern trust laws that address creditor protection issues for trusts, and does not have a state income tax.

What’s a Dynasty Trust?

A dynasty trust is a type of irrevocable trust that allows the grantor to set strict rules for how the money is managed and distributed to beneficiaries while avoiding estate tax. Historically, trusts could only last a certain number of years, as many states had rules again “perpetuities.” However, states such as South Dakota have done away with rules against perpetuities, allowing for the creation of dynasty trusts that have no expiration and can endure for many generations.

 It’s important to understand that, once a dynasty trust is funded, the grantor has no control over the trust’s assets and is unable to amend the trust’s terms. The same is true for the trust’s future beneficiaries. That’s why it’s vital to work with a qualified team to help ensure you’ve considered all possible outcomes before establishing a dynasty trust.