What is a dynasty trust and can it be created in New York?
A dynasty trust is a long-term irrevocable trust designed to hold and grow assets for multiple generations — children, grandchildren, great-grandchildren, and beyond — while avoiding estate tax at each generational transfer. New York retains a modified version of the Rule Against Perpetuities, which generally limits trusts to approximately 90 years under the Uniform Statutory Rule Against Perpetuities. This is sufficient to span three to four generations. For New York residents who want perpetual dynasty trusts, the trust can be sited in a more favorable state — such as Delaware, Nevada, South Dakota, or Alaska — which have abolished the Rule Against Perpetuities entirely. Morgan Legal Group advises New York families on both New York-sited dynasty trusts and out-of-state dynasty trust structures, helping clients choose the siting strategy that best aligns with their assets, trustees, and beneficiaries.
How does the generation-skipping transfer tax apply to dynasty trusts?
The generation-skipping transfer (GST) tax is a federal tax imposed on transfers of wealth to beneficiaries who are two or more generations below the donor — such as grandchildren and great-grandchildren. The GST tax was specifically designed to prevent wealthy families from using trusts to skip the estate tax at each generation, and it is imposed at a flat rate of 40%. However, each individual has a GST tax exemption — $13.61 million per person in 2024 — that can be allocated to transfers that would otherwise be subject to the GST tax. By funding a dynasty trust with assets equal to or less than the available GST exemption and properly allocating the exemption to the transfer, the trust becomes GST-exempt. This means that as the trust grows and distributes assets to grandchildren, great-grandchildren, and subsequent generations, no GST tax is ever imposed on those transfers. Russel Morgan, Esq. works with New York families to properly structure and fund dynasty trusts, allocate GST exemption, and select appropriate trust siting and trustee structures to maximize multi-generational wealth preservation.
Who should serve as trustee of a dynasty trust for a New York family?
Trustee selection is one of the most critical decisions in dynasty trust planning because the trustee will manage the trust and serve beneficiaries across multiple decades and multiple generations. An individual trustee offers personalized attention and family knowledge, but individual trustees are subject to death, incapacity, and potential conflicts of interest. A corporate trustee offers institutional continuity, professional investment management, and regulatory oversight, but can be inflexible and expensive. Many sophisticated families use a trust protector as a check on the corporate trustee, with the power to remove and replace trustees, veto certain distributions, and modify administrative provisions. For New York families who site their dynasty trust in Delaware or South Dakota, directed trust statutes in those states allow the investment function and distribution function to be separated among different parties — giving maximum flexibility and control. Morgan Legal Group helps New York families design governance structures for dynasty trusts that balance professional management with family oversight across generations.
How is a dynasty trust funded and what assets are best suited for it?
A dynasty trust is typically funded through a combination of gifts and sales from the grantor. Because the dynasty trust is an irrevocable trust, assets transferred to it leave the grantor's estate. The most efficient way to fund a dynasty trust is to contribute assets during the grantor's lifetime while the grantor has remaining gift tax exemption available. The grantor can also sell assets to the dynasty trust in exchange for a promissory note in an installment sale — removing future appreciation from the estate without using additional gift tax exemption. The best assets for a dynasty trust are those with the highest expected appreciation rates and the lowest current values. Common assets include closely held business interests (valued at discounts), real estate, growth-oriented investment portfolios, interests in family limited partnerships, and life insurance policies. The annual exclusion from gift tax — $18,000 per donee in 2024 — can also be used to make small annual contributions over many years, building the trust's asset base. Morgan Legal Group assists New York families across all five boroughs and surrounding counties in selecting, valuing, and transferring assets to dynasty trusts in a manner that maximizes tax efficiency and long-term wealth preservation.