Legacy Trusts

As a Folsom lawyer specializing in estate planning, I have created a variety of different trusts for clients who have varying needs and requirements. Among these trusts is a “legacy trust”, which is particularly beneficial for families with substantial wealth. A legacy trust, also known as a “legacy planning trust” or “dynasty trust,” is a type of irrevocable trust established to protect and preserve family wealth for multiple generations while minimizing estate taxes. Legacy trusts are designed to provide a lasting legacy for your descendants by keeping assets out of your taxable estate, shielding them from creditors, and ensuring that they benefit your chosen beneficiaries for many years.

Here are some key characteristics and benefits of legacy trusts:

1. Long-Term Wealth Preservation: Legacy trusts are designed to continue for multiple generations, allowing you to pass down assets, such as financial investments, real estate, and family businesses, to your descendants.
2. Estate Tax Minimization: By transferring assets into an irrevocable trust, you remove them from your taxable estate, potentially reducing estate tax liability for your heirs. The trust’s assets can appreciate over time without being subject to estate taxes when they pass to future generations. Please note that once assets are placed into an irrevocable trust, you lose a great degree of control over the assets. Click here for more information on irrevocable versus revocable trusts. 
3. Asset Protection: Legacy trusts can provide protection from creditors, lawsuits, and divorcing spouses. Assets held in the trust are shielded from the personal liabilities of the beneficiaries.
4. Control and Governance: While you transfer assets to the trust, you can retain some level of control over how those assets are managed and distributed, defining the trust’s terms and conditions. As stated earlier, this varies depending on whether the trust is revocable or irrevocable.
5. Income Generation: Legacy trusts can generate income for beneficiaries, helping to provide for their financial needs while preserving the principal for future generations. 
6. Philanthropy: You can include provisions in the trust for charitable giving, allowing the trust to support charitable causes that are important to your family. This is a common feature of many legacy trusts. 
7. Spendthrift Provisions: Legacy trusts can include spendthrift provisions that limit the beneficiaries’ ability to access the trust’s assets, ensuring that the assets are used prudently.
8. Privacy: Trusts are private documents, so the details of the trust and its assets are not part of the public record, providing privacy for your family’s financial matters. This is of particular concern for families that may have large estates and they want their matters kept out of the public eye. Wills, on the other hand, become part of the public record when the probate proceedings begin. 
9. Legal and Financial Expertise: Establishing a legacy trust can be complex, so it’s advisable to consult with not only an estate planning attorney but, if necessary, financial advisors or tax professionals to ensure that the trust is structured properly and serves your long-term goals.

Conclusion

Legacy trusts are powerful tools for individuals and families with substantial wealth who want to create a lasting financial legacy for future generations. However, they are typically irrevocable, meaning that once assets are transferred into the trust, you generally cannot change your mind or reclaim those assets, so careful consideration and professional guidance are essential before establishing one. If you have any questions about estate planning and legacy trusts, or are seeking a Folsom estate planning lawyer, please contact Thapar Law at 916-579-0605 or send us a message.