Dynastic wealth often begins with a trust. Here's how wealthy families can pass their money down from one generation to the next.
they are often referring to beneficiaries who receive assets from a trust without having earned that money or even having had to manage it while in trust."Read morePeople assume trust-fund babies are spoiled 20-somethings born with silver spoons — but they're not always who you thinkThe purposes of a trust can vary, but many people set up trusts to make sure their children and descendants will be taken care of after death, according to Rosen-Prinz.
Estate taxes and other transfer taxes like gift taxes and generation-skipping transfer taxes are set up to prevent dynastic accumulation of inherited wealth by charging a tax rate of 40%, Rosen-Prinz explained. When that tax rate is implemented on transferable assets, it"in some way redistributes wealth from the very rich.
The beneficiary in this case is known as a"skip person" —"someone who is more than 37.5 years younger than the grantor," Waltenberger said."This can be anyone, not necessarily a relative; but it is commonly a trust established for the benefit of a grandchild." She added:"In my experience, many families establish GST trust planning by establishing lifetime trusts for the benefit of their children, allowing their child and potentially their child's descendants, to benefit from the trust assets during that child's lifetime, then at the child's death, allowing the assets to pass to the grandchildren in a lifetime trust for their benefit. This cycle can continue as long as state law provides and/or assets remain inside the trust.
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