Dynasty Trust
A long-term irrevocable trust designed to pass wealth through multiple generations without incurring estate or gift taxes at each generational transfer. It can last for centuries in states that have abolished the rule against perpetuities.
Legal Definition
A multi-generational irrevocable trust designed to hold and distribute assets across multiple generations, typically established in a jurisdiction that has abolished or significantly extended the rule against perpetuities, and funded within the GST tax exemption to avoid transfer taxes at each generation.
Practical Example
A wealthy family creates a dynasty trust in South Dakota (which has no rule against perpetuities) with $13.61 million. The trust provides for children, grandchildren, and great-grandchildren for potentially centuries, with no estate tax owed when each generation dies.