Dynasty Trust Template

Dynasty Trust Template

CRITICAL PLANNING NOTE: The effectiveness of a Dynasty Trust depends heavily on:
(1) Jurisdiction selection — only use states that have abolished or significantly modified the Rule Against Perpetuities;
(2) GST exemption allocation — the trust must be allocated GST exemption (2025: $13.99 million; 2026: $15 million per the One Big Beautiful Bill Act) to achieve a zero inclusion ratio;
(3) Situs planning — several states (Delaware, South Dakota, Nevada, Alaska) offer no state income tax on accumulated trust income, strong creditor protection, and favorable trust protector/decanting statutes.

Perpetual Trust Jurisdiction Comparison

DAPT = Domestic Asset Protection Trust (allows settlor to be discretionary beneficiary)

GST Exemption Reference Table

The One Big Beautiful Bill Act (enacted 2025) permanently increased the exemption to $15 million effective January 1, 2026, indexed for inflation, eliminating the TCJA sunset that was previously scheduled to reduce the exemption to approximately $7 million in 2026.

Dynasty Trust Agreement

This Dynasty Trust Agreement ("Trust") is made on [__/__/____] by:

Grantor: [________________________________] (the "Grantor")
Initial Trustee: [________________________________] (the "Trustee")
Trust Protector: [________________________________] (the "Trust Protector")

Article I — Trust Formation

1.1 Trust Name. This Trust shall be known as the "[________________________________] Dynasty Trust" (the "Trust").

1.2 Trust Purpose. The purpose of this Trust is to:
(a) Preserve and grow wealth for the benefit of Grantor's descendants over multiple generations;
(b) Minimize generation-skipping transfer taxes through allocation of Grantor's GST exemption;
(c) Protect Trust assets from the creditors, divorcing spouses, and estate taxes of beneficiaries;
(d) Continue in perpetuity (or for the maximum period permitted by applicable law) in the trust situs jurisdiction.

1.3 Situs and Governing Law. The initial situs of this Trust shall be the State of [________________________________] (the "Situs State"). This Trust shall be governed by the laws of the Situs State, including its trust law, tax law, and perpetuities law. The Trust Protector may change the Situs and governing law pursuant to Article VIII.

1.4 Rule Against Perpetuities. This Trust is established in a jurisdiction that has [☐ abolished / ☐ significantly modified] the Rule Against Perpetuities. This Trust shall continue in perpetuity [☐ or for [____] years from the date of execution, whichever is longer] unless sooner terminated pursuant to Article XII.

Article II — Funding

2.1 Initial Trust Property. Grantor hereby irrevocably transfers and assigns to Trustee the property described in Schedule A attached hereto.

2.2 Initial Funding Amount. $[________________________________] / [Description of initial property]

2.3 Additional Contributions. Additional contributions may be made to this Trust by Grantor, Grantor's spouse, or any other person. Each additional contribution shall be noted on an updated Schedule A.

2.4 Grantor Trust Status. ☐ This Trust is intentionally structured as a "grantor trust" during Grantor's lifetime (see Article X), meaning Grantor pays income taxes on Trust income without such tax payment being treated as an additional gift. This "tax burn" strategy allows tax-free wealth transfer equal to the income taxes paid.

Article III — Beneficiaries

3.1 Primary Beneficiaries (First Generation).

3.2 Secondary Beneficiaries (Second Generation). All descendants of the primary beneficiaries living from time to time.

3.3 Tertiary and Subsequent Beneficiaries. All descendants of Grantor living from time to time, per stirpes.

3.4 After-Born and Adopted Descendants. Any person born to or legally adopted by a descendant of Grantor shall be treated as a descendant for all purposes of this Trust from the date of birth or adoption.

3.5 Disclaimer. Any beneficiary may disclaim his/her interest pursuant to IRC § 2518 within nine months of the taxable event creating the interest.

Article IV — Distribution Standards

4.1 Distribution Standards — Generation by Generation.

First Generation (Grantor's Children):
Trustee may distribute income and/or principal to Grantor's children for:

• ☐ Health, education, maintenance, and support (HEMS — ascertainable standard; recommended for estate inclusion avoidance)
• ☐ Health and education only (most restrictive — maximum asset protection)
• ☐ Broader standard: [________________________________]

Second Generation (Grandchildren) and Beyond:
Trustee may distribute income and/or principal to grandchildren and more remote descendants for HEMS, considering:
(a) Other resources available to the beneficiary;
(b) The needs of other beneficiaries;
(c) The goal of preserving Trust assets for future generations.

4.2 Mandatory Income Distributions (Optional). ☐ Trustee shall distribute all net income annually to first-generation beneficiaries. ☐ Trustee has full discretion over all distributions — no mandatory income distributions.

4.3 Distribution Committee (Optional). ☐ A Distribution Committee consisting of [________________________________] shall advise Trustee on distribution decisions. Trustee shall give due weight to the Committee's recommendations but retains final authority. ☐ No Distribution Committee.

4.4 Powers of Appointment.

• ☐ Each first-generation beneficiary is granted a limited testamentary power of appointment to redirect Trust assets at death among Grantor's descendants. This power does not cause estate inclusion if limited to Grantor's descendants.
• ☐ Trust Protector may grant limited powers of appointment to beneficiaries.
• ☐ No powers of appointment.

4.5 Incentive Distribution Provisions (Optional).
☐ Trustee may condition distributions on achievement of the following milestones:

• Earning a college degree: ☐ One-time distribution of $[____]
• Earning a graduate degree: ☐ One-time distribution of $[____]
• Active employment (income-matching): ☐ Match beneficiary's earned income up to $[____]/year
• Starting a business: ☐ Trustee discretion up to $[____] per event
• Other: [________________________________]

Article V — Trust Protector

5.1 Trust Protector Designation. [________________________________] shall serve as initial Trust Protector. Successor Trust Protectors:

• First Successor: [________________________________]
• Second Successor: Independent institution selected by beneficiary majority vote

5.2 Trust Protector Powers. The Trust Protector shall have the following powers:
☐ Remove and replace the Trustee (with or without cause, in Trust Protector's discretion)
☐ Appoint a successor Trustee
☐ Change the situs and governing law of the Trust
☐ Amend administrative provisions of the Trust (not dispositive terms)
☐ Grant limited powers of appointment to beneficiaries
☐ Consent to (or veto) decanting of the Trust to a new trust
☐ Terminate the Trust with distribution to then-living beneficiaries
☐ Resolve disputes between co-trustees or between Trustee and beneficiaries
☐ Modify distribution standards in response to changes in tax law
☐ Add or remove beneficiaries to the class of discretionary beneficiaries (exercise with caution — potential gift tax implications)

5.3 Trust Protector Not a Fiduciary. ☐ The Trust Protector is acting in a non-fiduciary capacity and is not subject to the duties of a trustee except as required by applicable law. ☐ The Trust Protector is a fiduciary subject to the same duties as a trustee.

5.4 Compensation. Trust Protector shall be entitled to reasonable compensation: $[________________________________] per year or $[________________________________] per action taken.

Article VI — Trustee Provisions

6.1 Initial Trustee. [________________________________] shall serve as initial Trustee. (For dynasty trusts, a corporate/institutional trustee is strongly recommended for continuity.)

6.2 Successor Trustees:

• First Successor: [________________________________]
• Corporate Trustee (institutional final successor): [________________________________]

6.3 Independent Trustee. For purposes of discretionary distributions to any beneficiary, an independent trustee (a person who is not a beneficiary and not related or subordinate to a beneficiary within IRC § 672(c)) must make the distribution decision to avoid estate inclusion.

6.4 Directed Trust Structure (Optional). ☐ This Trust shall be administered as a directed trust, with:

• Investment Adviser: [________________________________] — directs all investment decisions
• Distribution Trustee: [________________________________] — makes all distribution decisions
• Administrative Trustee: [________________________________] — handles ministerial and administrative duties

(Directed trust structure separates investment and distribution functions, offering the best combination of institutional investment management and family-sensitive distribution decisions.)

6.5 Trustee Compensation. ☐ Per published fee schedule of corporate trustee. ☐ [____]% of Trust assets annually for investment management; [____]% for distribution/administrative services.

Article VII — Trustee Investment Powers

7.1 Prudent Investor Standard. Trustee shall invest Trust assets in accordance with the Prudent Investor Act applicable in the Situs State, considering:
(a) General economic conditions;
(b) Inflation and deflation;
(c) Expected total return from income and appreciation;
(d) Needs for liquidity and preservation of capital;
(e) Tax consequences of investment decisions.

7.2 Specific Investment Powers:
☐ Invest in diversified portfolio of stocks, bonds, mutual funds, and ETFs
☐ Invest in real estate and real estate investment trusts (REITs)
☐ Invest in private equity, venture capital, and hedge funds
☐ Hold closely held family business interests
☐ Make loans to beneficiaries at applicable federal rates (AFR) under IRC § 7872
☐ Purchase life insurance on lives of Grantor, spouse, or descendants
☐ Form and contribute to family limited partnerships or LLCs

Article VIII — Power to Change Situs

8.1 Trustee Power. Trustee, with the written consent of Trust Protector, may change the situs of this Trust to any jurisdiction that is more favorable in terms of:
(a) State income taxation of trust income;
(b) Rule Against Perpetuities;
(c) Creditor protection laws;
(d) Trust administration statutes.

8.2 Trust Protector Power. Alternatively, Trust Protector alone may change the situs and governing law by written notice to Trustee.

8.3 Procedures. Upon change of situs, Trustee shall:
(a) Execute all documents necessary to effectuate the change;
(b) Notify all beneficiaries of the change within 30 days;
(c) Update all Trust accounts and records to reflect the new situs.

Article IX — Decanting

9.1 Power to Decant. Pursuant to applicable state law (Uniform Trust Decanting Act or applicable state equivalent), Trustee may, with the written consent of Trust Protector, decant this Trust to a new trust with different terms if:
(a) The new trust benefits the same beneficiaries;
(b) The decanting does not violate the terms of this Trust or applicable law; and
(c) The decanting is consistent with the purposes of this Trust.

9.2 Purposes for Decanting. Trustee may decant to:

• Update Trust terms to reflect changes in tax law
• Move to a more favorable jurisdiction
• Modify distribution standards for changed circumstances
• Address a beneficiary's disability or special needs
• Separate into sub-trusts for different branches of the family

Article X — Tax Provisions

10.1 GST Exemption Allocation. Upon the creation of this Trust, Grantor's executor/representative is directed to allocate $[________________________________] of Grantor's GST exemption to this Trust to achieve an inclusion ratio of zero. (A zero inclusion ratio means no GST tax will be imposed on distributions to or for the benefit of skip persons.)

10.2 Grantor Trust Powers. During Grantor's lifetime, this Trust is intended to be treated as a grantor trust under IRC §§ 671-679 by reason of Grantor's retention of:
☐ The power to substitute assets of equivalent value (IRC § 675(4)) — recommended "toggle" power
☐ An independent trustee's power to add charitable organizations as beneficiaries (IRC § 674)
☐ Other: [________________________________]

10.3 Grantor Trust Termination. Upon Grantor's death or upon release of grantor trust powers, the Trust shall become a non-grantor trust and shall be a separate taxpayer for income tax purposes (EIN: [________________________________]).

10.4 Tax Reimbursement. ☐ Trustee may (but is not required to) reimburse Grantor for income taxes paid on Trust income if Trustee determines such reimbursement is appropriate. (Discretionary reimbursement does not cause estate inclusion per Rev. Rul. 2004-64.)

Article XI — Spendthrift Protection

11.1 Spendthrift Clause. No beneficiary shall have the right to anticipate, assign, pledge, encumber, or in any manner alienate his/her interest in Trust income or principal prior to distribution. Trust assets shall not be subject to the claims of any creditor of any beneficiary, including claims arising from divorce, bankruptcy, or judgments, prior to distribution.

11.2 Self-Settled Trust (DAPT Option). ☐ If established in a state permitting Domestic Asset Protection Trusts (DE, SD, NV, AK, WY, etc.), Grantor may be included as a discretionary beneficiary while retaining asset protection from Grantor's future creditors, subject to fraudulent transfer laws and state-specific requirements.

Article XII — Termination

12.1 Trust Duration. This Trust shall continue in perpetuity [OR: until the [____th] anniversary of the date of execution / the death of the last surviving descendant of Grantor living on the date of execution] unless sooner terminated.

12.2 Termination by Trustee. Trustee may terminate any sub-trust that has become uneconomical to administer (Trust assets below $[____]) by distributing the remaining assets to the current income beneficiaries or to the contingent remainder beneficiaries.

12.3 Final Distribution. Upon termination of the entire Trust, Trustee shall distribute all remaining Trust assets per stirpes among Grantor's then-living descendants, or if none, to [________________________________].

Article XIII — Miscellaneous

13.1 No-Contest Clause. ☐ Any beneficiary who contests any provision of this Trust or attempts to set aside or invalidate any provision shall forfeit all distributions to which such beneficiary would otherwise be entitled.

13.2 Mediation. Before commencing litigation concerning this Trust, the parties shall participate in non-binding mediation with a mediator agreed upon by the parties.

13.3 Governing Law. As specified in Section 1.3, subject to change by Trust Protector pursuant to Article VIII.

13.4 Severability. If any provision is invalid, the remaining provisions remain in full force.

Signatures

GRANTOR:
Signature: [________________________________]
Printed Name: [________________________________]
Date: [__/__/____]

TRUSTEE (Acceptance):
Signature: [________________________________]
Printed Name: [________________________________]
Institution: [________________________________]
Date: [__/__/____]

TRUST PROTECTOR (Acceptance):
Signature: [________________________________]
Printed Name: [________________________________]
Date: [__/__/____]

NOTARY ACKNOWLEDGMENT:
State of [________________________________] | County of [________________________________]
On [__/__/____], before me, [________________________________], personally appeared the above-named individuals.
Notary Public Signature: [________________________________]
My Commission Expires: [__/__/____]
[NOTARY SEAL]

Schedule A — Trust Property at Formation

Schedule B — Beneficiary Family Tree

(Attach genealogical chart identifying all current beneficiaries and their relationships to Grantor)

Sources: IRC §§ 2601, 2631-2642, 2651; One Big Beautiful Bill Act (2025) — $15M exemption effective 2026; Uniform Trust Decanting Act; UTC §§ 808, 816; Rev. Rul. 2004-64 (grantor trust reimbursement); state perpetuities laws — DE, SD, NV, AK, WY, FL, TN, NH (perpetual/long-term trust states).