Traditionally, most trusts were designed to last for a single generation. A person dies, their assets are distributed to their beneficiaries, or the trustee holds onto the property for the beneficiaries until those beneficiaries reach a certain age, then distribute trust property to them.
The more modern, current trend is multi-generational trusts, also called “dynastic trusts.” Instead of distributing the property at the grantor’s death, the trust continues and grantor’s children become beneficiaries of the trust. The trustee manages the properties for the new beneficiaries and provides them support or other funds based on the trust agreement’s instructions. After this set of beneficiaries passes away, the next generation become beneficiaries. From one grantor, the trust can go on to benefit successive generations of the grantor’s family. In Nevada, such a trust can last 365 years; in South Dakota, such a trust can last for 1000 years.
When a single generation trust ends, the trust is emptied and the trust assets are distributed to each beneficiary. Those assets then become part of those beneficiary’s estates. At each generation, there is a likelihood that the asset can be diminished by some form of estate tax. In a multigenerational dynastic trust, the trust assets never become part of the beneficiary’s estate, while at the same time, the beneficiary receives beneficial use of the trust property.
The benefit of having a Dynastic Trust, is that depending upon how it is constructed, the trust assets can be protected from estate tax, law suits, and divorces for multiple generations. When combined with the goal of guiding the family and instilling values into descendants, this type of trust is especially powerful.