Many people would like to set up a Trust to transfer assets to several generations—children, grandchildren, great-grandchildren. A Dynasty Trust can accomplish this goal.
The person who forms and funds the Trust is called the grantor. The grantor transfers assets to the Trust and will pay gift tax on the amount of the gift above the exclusion level ($5,000,000 in 2012). From that point forward, no other taxes will be due from these assets. The assets are out of the grantor’s estate so there will be no estate taxes due at his/her death. The assets will grow in the Trust in order to provide for the beneficiaries in future generations.
Not only will the grantor be able to benefit future generations monetarily, but the Dynasty Trust protects the beneficiaries inheritance from creditors and will assure that the inherited property will not become subject to a claim of a beneficiaries spouse in a divorce.