FINE-TUNING DYNASTY TRUSTS AS THE CENTERPIECE OF THE FAMILY WEALTH PLAN
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FINE-TUNING
DYNASTY TRUSTS
AS THE
CENTERPIECE OF
THE FAMILY WEALTH
PLAN
RICHARD A. OSHINS, JEROME M. HESCH, AND NEIL E. SCHOENBLUM
Dynasty trusts, How many times has an estate planner heard the This reflexive resistance to trusts2 is actually
which permit
inter- and multi-
common refrain from a client at that first meeting doing the client a disservice and is based on
generational - - “All I want is a simple will.”1 How often has the several glaringly faulty assumptions. Certainly,
wealth attorney who dabbles in estate planning defended a will can be simple.3 If simple and standard-
management,
are more
the will he or she routinely employs by explaining, ized, it can also be rather inexpensive. The
effective than “My clients don’t want the complexities of trusts.” problem is that a simple will fails to assure that
traditional This attitude has become even more prevalent the intended beneficiaries4 really will be able to
trusts.
with the current exemption, $5,250,000 for a sin- use and enjoy the property as the decedent in-
gle person and $10,500,000 for a married couple. tended and that “predators”—such as creditors,
Since clients feel they are not exposed to estate a current or former spouse, deceitful invest-
taxes, many of them no longer believe there is a ment advisors and the government—do not
need for trusts. Even skilled practitioners may be sooner or later reach it instead.5 In other words,
inclined to accept their clients’ summary dismissal it is an illusion to naively believe that the client’s
of the trust vehicle, especially if estate taxes are no goals necessarily have been accomplished sim-
longer a concern. However, it should be remem- ply because the intended beneficiaries received
bered that while saving taxes is frequently an im- the property.
portant objective, it is only one of many goals that Is the trust a viable alternative, however?
can be accomplished for the client through the use The critique usually leveled against trusts is
of a trust. Moreover, even if estate taxes would not that they are “too complex;”6 that they are in-
be applicable, trusts can often save considerable flexible; that they entail surrender of control to
income taxes. outsiders; and that they are comparatively ex-
pensive, both in terms of their creation and on-
going administration. It is perceived that trusts
are the exclusive preserve of the exceptionally
RICHARD A. OSHINS, J.D., LL.M, M.B.A., is a member of Oshins & wealthy, who turn to trusts when they have no
Associates in Las Vegas, Nevada; JEROME M. HESCH is a special sen-
ior tax counsel at Oshins & Associates in Las Vegas, Nevada, of counsel
other alternative to preserve their wealth and
at Berger Singerman in Miami, Florida, and an adjunct professor at the dynastic aspirations.7
University of Miami and Florida International University Schools of Law
in Miami, Florida; NEIL E. SCHOENBLUM, J.D., LL.M., is a senior
In fact, the trust is almost always better
trust officer with the Provident Trust Group in Las Vegas, Nevada. suited to achieve the client’s goals, even for
148 PRACTICAL TAX STRATEGIES OCTOBER 2013clients with a net worth well below the estate 4. Creditor protection. Protection of the benefici-
tax exemption. Clients have what might be de- aries’ inherited wealth from claimants, notably
scribed as a postmortem “wish list.” That is not creditors and divorcing or divorced spouses.9
to say that a client will walk into the estate plan- 5. Tax savings. Reducing the tax burden, both es-
ner’s office and promptly rattle off the list— tate and income taxes, at the federal, state, and
rather, the clients’ goals are inherent in the local levels, so that inheritances are not unduly
hopes and concerns expressed, if only in a gen- diminished.
eral manner to the advisor. So, what are the 6. Avoiding complexity. Relative simplicity of the
goals on that typical wish list? plan, so that the preceding wishes can be at-
1. Managerial control. Handing over management tained, without the need for endless, expensive
control of assets, in varying degrees, to descen- consultations with the estate planner or
dants, subject to their capabilities, maturity, trustee, which too often tend to leave the client
and other family members overwhelmed and
and respect for values crucial to the client. This
frustrated.
includes investment and business decisions.
2. Use of and enjoyment of trust assets. Use and en-
joyment of the trust assets until death with the The virtues of the trust
primary beneficiaries using them in preference With respect to the client wish list, the simple will
to younger generation beneficiaries. In the case distributing wealth outright, provides the recipi-
of real property, that means, literally, use of ent with control, use, and certain flexibility, but
premises. In the case of intangible assets, it does not provide any protection from taxes and
means distribution of some of the income and/or creditors. Arguably, it provides simplicity. How-
principal, while retaining the rest until needed. ever, this simplicity often is illusory—being true
3. Flexibility. The ability to make changes in the initially, but not sustained over time. A trust cre-
future to take account of changing circum- ated by somebody else is the best (and, for that
stances, both with respect to family members, reason, generally the simplest) estate10 and asset
e.g., to take into account that a future descen- protection plan for the beneficiary. The other
dant may have “special needs,” and exogenous goals cannot be satisfied, because the simple will
factors like changing tax and other laws,8 operates to distribute inheritances outright at the
1
See Manterfield, “Ethical Issues for Estate Planning and ternative to a right to transfer property at death by will or in-
Family Business Succession Advisors,” Estate Planning For testacy, she naively stated: “The fact that it may be possible
The Family Business Owner, SS008 ALI-ABA 913, 959 (6/7- for the owners of these interests to effectively control dispo-
9/10) (“Most clients seek assistance in the preparation of a sition upon death through complex inter vivos transactions
‘short, simple will.’ No client comes in with the request that such as revocable trusts is simply not an adequate substi-
the advisors prepare ‘a really complicated estate plan!’”). tute.”
2 7
In some cases, the client and planner may not so much re- In fact, even in the case of a small estate, a trust may be jus-
sist the trust as simply overlook it. Aucutt, “Structuring Trust tified. Consider a young couple with minor children, ages 4
Arrangements for Flexibility,” 35 U. of Miami Inst. on Est. and 7, who have a total estate, including life insurance, of a
Plan., ¶ 900 (2001) (“The old refrain, ‘All I want is a simple modest amount. If the parents were to die prematurely, hav-
will,’ helps explain why so many people, including many ad- ing a trust in place would be preferable to other alternatives
visors who should know better, so often overlook trusts for wealth management. See Oshins and Oshins, “Protect-
when planning for the transfer of wealth as an inheritance ing & Preserving Wealth into the Next Millennium,” 137
within the family.”). Trusts & Estates 52 n.17 (September 1998). See also
3
See, however, Pennell, “Ethics Issues for Estate Planners,” Dukeminier and Sitkoff, Wills, Trusts, and Estates 9th Ed.
Estate Planning in Depth, SU036 ALI-ABA 1045, 1086 (6/23- (Aspen Publishers, 2013), p. 129-32. Of course, in this case,
28/13) (“Nevertheless, many attorneys still believe that any- the designation of a beneficiary as trustee, a key recommen-
one can draft a ‘simple will,’ notwithstanding the reality, in the dation of this article, would not be possible.
current estate planning environment, that there are short wills 8
and simple lawyers but probably no simple wills.”). The failure to take this into account is aptly demonstrated by
4 Judge Richard Posner’s discussion of clauses depriving a
When a client intends to pass on wealth, it is generally to the child of a share of the decedent’s wealth on account of mar-
client’s children, grandchildren, and even subsequent gen-
rying outside the family’s faith or violating some other condi-
erations. In this article, they are referred to by several terms,
tion. The problem with inflexible Dead Hand control is that
such as the client’s beneficiaries, the client’s descendants,
there is no opportunity for “recontracting.” See Posner, Eco-
or the client’s inheritors.
5 nomic Analysis of Law, 7th Ed. (Aspen Publishers, 2007),
Aucutt, supra note 2 (“In the rush to achieve simplicity, such section 18.7. However, a powerful tool for assuring the abil-
persons fail to realize the enormous, unnecessary and irre-
ity to “recontract” is the special power of appointment, ex-
trievable loss of assets (to taxes, divorce, and creditors) that
ercisable at each generation level. See infra text accompa-
many families will suffer for failure to appreciate the protec-
nying note 27 for a discussion of this flexibility.
tions that a trust can provide when passing wealth from gen- 9
eration to generation.”) (emphasis added). The property transferred in trust is the trust’s property, not
6
The classic pronouncement along these lines was made by the beneficiary’s wealth.
10
Supreme Court Justice Sandra Day O’Connor in her opinion An example is the generation-skipping dynasty trust. See
for the Court in Hodel v. Irving, 481 U.S. 704 (1987). Explain- Cooper, “A Voluntary Tax? New Perspectives on Sophisticated
ing why an inter vivos revocable trust is not a satisfactory al- Estate Tax Avoidance,” 77 Colum. L. Rev. 161, 205-06 (1977).
DYNASTY TRUSTS OCTOBER 2013 PRACTICAL TAX STRATEGIES 149decedent’s death. The question is, then, can the ment of choice for transferring this unfettered
trust fulfill the client’s post-mortem wish list in a control is plainly the “simple will.”12 The simple
superior manner? The authors’ conclusion is an will cannot assure distributions at various ages; at
emphatic YES! a minimum, a testamentary trust is needed. How-
ever, the authors argue that “control” requires an
even more nuanced response, if the interests of the
When the alternative is outright disposition, immediate and subsequent generations are to be
the trust is almost always better suited to properly served.
achieve the client’s goals. A faulty premise often taken as a given is that
a trust cannot afford the same level of control to
Managerial control. To one degree or another, a beneficiary as can outright ownership. A more
the client wishes a beneficiary to have control over sophisticated analysis reveals the flaw in this be-
an inheritance unless giving control is undesirable lief. For example, the primary beneficiary, ordi-
based on the beneficiary’s profile. In addition, the narily a child of the client, can serve as a trustee
beneficiary will not be happy unless he or she is or as a co-trustee. As trustee, the beneficiary can
given reasonable control at proper maturity. For be afforded broad discretion in making invest-
many clients, the natural impulse is to transfer as- ments and in exercising indirect control as to
sets outright once the client is no longer alive or distributions. Upon the death of the primary
no longer needs to have access to his or her wealth, beneficiary, a successor primary beneficiary or
or to provide for outright distributions once the beneficiaries can assume the role of successor
beneficiary reaches a certain age.11 The instru- trustee. In most circumstances, tax planning13
11 15
A typical example is to distribute one-third of the trust assets Even if the co-trustees share distributional authority, it will
to the beneficiary at age 25, one-third of the balance at age suffice to protect the beneficiary’s interests from creditors.
30, and the remainder at age 35. Restatement (Third) of Trusts, section 60 cmt. g. However,
12
Alternatively, it could be a revocable trust established during this would not be the case for estate tax unless the trustees
the lifetime of the client and which is unfunded, partially were adverse. See Section 2041(b)(1)(C)(ii). One solution to
the estate tax problem is for the trustee-beneficiary to be
funded, or totally funded during the client’s lifetime. The rev-
given discretionary power over distributions, but only those
ocable trust could provide, just as the will provides, that
permitted under an ascertainable standard.
upon the death of the settlor, the trust estate is to be distrib- 16
uted outright to the indicated beneficiaries. References in This principle was established in Estate of Wall, 101 TC 300
this article to the “simple will” should also be understood to (1993). See also Rev. Rul. 95-58, 1995-2 CB 191, modifying
reference this “will substitute.” Rev. Rul. 79-353, 1979-2 CB 325 and Rev. Rul. 81-51,
13 1981-1 CB 458, adopting the view of Estate of Wall, and Es-
If the beneficiary is likely to have a taxable estate, after tak- tate of Vak, 973 F.2d 1409, 70 AFTR2d 92-6239 (CA-8,
ing into account lifetime adjusted taxable gifts, unlimited dis- 1992), rev’g TCM 1991-503. However, the position of the
cretion to access the trust estate could be regarded as a IRS is that, for a provision allowing a substitution of trustees
general power of appointment. This would result in an inclu- not to have adverse consequences for the beneficiary, the
sion in the beneficiary’s gross estate under Section 2041. provision must require that any newly appointed trustee not
The argument has been made that, as trustee, the benefici- be related or subordinate to the beneficiary as defined in
ary would have to act impartially. Therefore, there would be Section 672(c). See Rev. Rul. 95-58, 1995-2 CB 191.
a sufficient restraint on the exercise of discretion so as to 17
A beneficiary with a special power of appointment is not ex-
avoid inclusion in the beneficiary’s gross estate. Neverthe- posed to estate tax in that beneficiary’s gross estate. See
less, unless state law explicitly bars distributions by the Section 2041.
trustee to himself or herself, the relevant authorities make 18
Full use and enjoyment in this context is the maximum use
clear that the discretionary trustee-beneficiary is deemed to and control permitted by law, while still preserving the tax
have a general power of appointment. See Rev. Rul. 54-153, and creditor protections. Properly designed and imple-
1954-1 CB 185; Maytag, 493 F. 2d 995, 33 AFTR2d 74- mented, it is the functional equivalent of outright ownership.
1454 (CA-10, 1974); Sheedy, 691 F. Supp. 1187, 63 AFTR 19
For example, what if the children are under age at the time
2d 89-1531 (DC Wis., 1988).
14
of transfer? Or what if the children are of majority age, but
Use of a limiting ascertainable standard, while helpful for tax still not at a point in life at which their stability and sophisti-
purposes, may not work for purposes of protecting the ben- cation has been established? Finally, what if a child is gen-
eficiary from creditors. Creditors could reach the trust estate erally responsible, but is married to someone the parents
to the extent that the trustee could exercise discretion for his consider controlling?
or her own benefit. The limiting ascertainable standard might 20
See, e.g., Uniform Trust Code section 505(2).
not be taken into account. See Restatement (Third) of 21
As long as a creditor of any sort can reach the trust estate,
Trusts, section 60 cmts. a. and g. The Uniform Trust Code
the portion that can be reached is regarded as retained by
section 504(e) addresses the matter by changing this com- the settlor-discretionary beneficiary and subject to inclusion
mon law rule. Creditors can reach the assets only to the in the gross estate of the settlor-discretionary beneficiary.
same very limited extent they could if the beneficiary was not See Poker, “Asset Protection Planning,” Estate Planning in
also the trustee. The use of an ascertainable standard does Depth, SU036 ALI-ABA 771, 805 (6/23-28/13)... “Estate in-
not affect the result. See Uniform Trust Code section 504(e). clusion could not be avoided under these statutes [self-set-
In states that follow the common law rule, the power to tled trust legislation] if the ability of any creditor to reach trust
make discretionary distributions, along with the delimiting assets under any circumstances at any time caused inclu-
ascertainable standard, could be toggled on and off de- sion under IRC § 2036. In addition, even if one adopts a
pending on whether or not there were judgments on the narrower reading of the authorities under IRC § 2036, it is
horizon against the trustee-beneficiary. See Horn, “Flexible still unclear whether the asset protection will succeed under
Trusts and Estates for Uncertain Times,” Estate Planning in the applicable statutes. In such a case, one cannot be cer-
Depth, SN070 ALI-ABA 315, 334-42 (6/15-20/08). tain that estate tax inclusion will be avoided.”
150 PRACTICAL TAX STRATEGIES OCTOBER 2013 DYNASTY TRUSTSand creditor sheltering14 are improved when Short of special situations, such as an inca-
certain controls are given to an independent co- pacitated child, a parent is likely to hope for the
trustee, who has sole authority over discre- best and be inclined to go “outright.” There may
tionary distributions.15 However, this should be strong pressure from the child, or the child’s
not be taken as a surrender of control. In partic- spouse, to do so. Nonetheless, even with respect
ular, the beneficiary serving as co-trustee can to the most responsible of children, there may
retain the power to replace the “independent” be forces at work beyond a child’s control, such
trustee with another “independent” trustee.16 as divorce, that can threaten to divert a sizeable
Practically, if not legally, this reposes total con- portion out of the family line in the future. It is
trol over discretionary distributions in the true that, once received outright, the benefici-
trustee-beneficiary. This practical power can be ary could transfer his or her inheritance to a
given without exposing the trustee-beneficiary’s self-settled spendthrift or discretionary trust in
inheritance to the aforementioned predators, as an effort to protect the assets against future
would be the case if the inheritance were owned claimants. However, once the beneficiary re-
outright. ceives, or has a right to the property, he or she is
Theoretically, as a fiduciary, the beneficiary- unable to obtain the benefits, protections, and
trustee owes an obligation to other beneficiar- controls that would have been available had the
ies. Their beneficial rights in the trust estate transfer been simply placed in trust by the
and the fiduciary duty the trustee owes them donor or testator. Self-settled trusts do not af-
inevitably constrain the primary beneficiary’s ford protection from creditors20 or from death
unfettered exercise of control. Yet, unfettered taxes,21 unless administered in one of the few
control would expose the trust assets to credi- states that afford protection from creditors to
tors and the taxing authorities. Reduced, but the settlor of such trust.22 In fact, the process of
adequate, control will shelter the trust assets creating and administering an effective, defen-
without reducing their beneficial enjoyment. sible, self-settled discretionary or spendthrift
The primary beneficiary still has flexibility by trust might in fact, be more complicated and
affording the primary beneficiary, in his or her
individual capacity, a special power of appoint-
ment.17 The awareness of the secondary benefi-
A nuanced approach is not possible with a
ciaries that the primary beneficiary can exer-
simple will that makes outright dispositions.
cise that special power in a manner deleterious
to their interests, and without the constraints of
fiduciary duty, should indirectly leave the pri- less likely to yield the sought-after protections,
mary beneficiary in full, uncontested control. than a preexisting trust created by a parent.23
In the words of Professor Edward Halbach, “[a] Furthermore, distinctions in access between
power of appointment is also a power of disap- certain “responsible” children receiving their
pointment.” shares outright and other ones receiving shares
Use and enjoyment of trust assets. Full use and in trust is almost guaranteed to foster serious
enjoyment18 can be given to the intended benefi- resentments that can fuel the disintegration of
ciary who is capable, a person one would pass the family ties once the parents are gone. This is
wealth to outright if it was not for the many bene- precisely the opposite of what the parents want.
fits of trusts. Not all potential beneficiaries have These distinctions in access can be ameliorated
equal needs, even when the product of the same if all children receive their shares in trust as
parents, the same environment, and the same up- beneficiaries. As to the finer distinctions, in
bringing. The fact is, some, if not all, of the poten- terms of control by the beneficiary over the
tial beneficiaries may be incapable, disabled,
spoiled, immature, profligate, easily manipulated, 22
The states that have adopted asset protection legislation in-
ill-informed, or even disinterested. Furthermore, clude: Alaska, Delaware, Hawaii, Missouri, Nevada, New
at the time of transfer, it may not be possible to Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota,
Tennessee, Utah, Virginia, Wyoming, and Colorado (although
know who will have which traits.19 In fact, over it is unclear whether the Colorado statute actually offers pro-
time, particular beneficiaries may display mixed tection). Of these, the leading states are Nevada, South
tendencies toward responsibility or irresponsibil- Dakota, Ohio, Tennessee, Alaska, Delaware, and Wyoming.
See Oshins, 4th Annual Domestic Asset Protection Trust
ity. Sometimes, beneficiaries may become wealthy State Rankings Chart (Updated) (July 2013), available at
in their own right and will not need the client’s www.oshins.com/images/DAPT_Rankings.pdf.
23
wealth. See, e.g., Poker, supra note 21, at 792-805.
DYNASTY TRUSTS OCTOBER 2013 PRACTICAL TAX STRATEGIES 151beneficial interest, these will be less apparent, remembering that the most common alterna-
especially if the trust instrument contains lim- tive is to distribute outright. Nonetheless, once
itations on wholesale access to information by properly advised, the beneficiary, too, should
all beneficiaries.24 appreciate the risks associated with outright
A nuanced approach is not possible with a ownership. At least with respect to the primary
simple will that makes outright dispositions. In beneficiary serving as trustee or co-trustee,
contrast, a trust can be tailored in any way nec- there will be access to the trust estate as neces-
essary to assure gradations of use and enjoy- sary. There is no material difference from out-
ment by differentiating distinct lines of descen- right ownership as far as access is concerned as
dants. Specifically, the trust can be subdivided long as the beneficiary can control the identity
by incorporating “per stirpes” language by of the trustees. On the other hand, there is a
which each family branch is controlled and ad- world of difference in terms of vulnerability to
ministered according to the profile of the mem- claimants. Through equitable26 ownership
bers of that family branch.25 Thus, controls, through a trust wrapper, the assets can be shel-
uses, investments, trustees, distributions, and tered from the reach of a divorcing or divorced
advisors can differ according to the needs, spouse, general creditors, and the taxing au-
wants, and maturity of the members of each thorities, all of whom may otherwise have some
family unit. cognizable claim on the beneficiary’s individual
The use of a trust clearly furthers the objec- wealth. When properly explained, the benefici-
tive of doing what is “best” for the client’s de- ary, too, should welcome the wrapping of his or
scendants. The initial perspective of a potential her inheritance in a trust structure.
beneficiary, however, will often be that he or Flexibility. A serious deficiency in the use of a
she should have unrestricted ownership of the simple will is that, once a distribution is made, the
inheritance (unless the desires are to restrict), plan is set in stone. For reasons already stated,
24
The extent to which a trustee must provide information to the /www.cdc.gov/nchs/nvss/marriage_divorce_tables.htm.
beneficiaries and the nature of that information differs signifi- The relationship between the divorce and marriage statistics
cantly at present from one state to another. Under Uniform is complex and has often been exaggerated by false claims,
Probate Code section 7-303(b), the trustee is required, upon such as that more than 50% of all marriages end in divorce.
request, to provide a beneficiary only “with a copy of the Still, there are a substantial number of divorces, so that a
terms of the trust which describe or affect his interest…”(em- risk exists that simply cannot be ignored. See, e.g., U.S.
phasis added). Under Uniform Trust Code section 813(b) Census, Statistical Abstract of the United States: 2012,
Comment, the beneficiary could compel “the trustee to fur- Table 131: Percent of First Marriages Reaching Stated An-
nish the beneficiary with a complete copy of the trust instru- niversary by Sex and Year of Marriage: 2009 at www.cen-
ment and not merely with those portions the trustee deems sus.gov/compendia/statab/2012/tables/12s0131.pdf.
30
relevant to the beneficiary’s interest.” See also Fletcher v. Section 2010 effectively exempts a taxable estate of $5 mil-
Fletcher, 480 S.E. 2d 488 (Va., 1987). Nevertheless, since lion (indexed for inflation). In the case of a married couple
2004, Uniform Trust Code section 105(b)(8)-(9), which makes this means $10 million, especially taking into account the
disclosure of certain information under the section 813(b) rule ability of the surviving spouse to use the unused portion of
mandatory, has been made optional. Thus, numerous states, the predeceasing spouse’s unified credit under Section
that otherwise have adopted the Uniform Trust Code, allow 2010(c), without even having to balance property ownership
the trust instrument to override the requirements of section between them. However, the actual mechanics of this porta-
813(b). See, e.g., Tenn. Ann. § 35-15-813(e), for a far-reach- bility via the deceased spouse’s unused exemption, can be
ing provision that could keep the beneficiary almost entirely in daunting, as can the “subtleties of the new paradigm of a $5
the dark. million plus exemption equivalent and portability.” Golden,
25
A per stirpes approach divides up the trust upon the death “Back to the Future—The Marital Deduction from Before
of the client and/or the client’s spouse based on the number ERTA to After ATRA,” Estate Planning in Depth, SU036 ALI-
of children surviving and deceased children survived by de- ABA 87, 111-17 (6/23-28/13).
scendants. There are alternatives to this traditional per stir- 31
For instance, President Obama’s 2014 budget proposals, re-
pes approach. However, this option generally reflects what leased on 4/10/13, would restrict the duration of the GST ex-
most simple wills provide. For example, a parent has three emption to 90 years. The Treasury explanations provide that,
children and intends to divide his or her assets equally “on the 90th anniversary of the creation of a trust, the GST
among the three children. If one of the children predeceases exclusion allocated to the trust would terminate…by increas-
the parent, and is survived by children, the parent’s estate is ing the inclusion ratio of the trust (as defined in section 2642)
still divided into three shares, with one share being for the to one, thereby rendering no part of the trust exempt from
benefit of the children of the deceased child. GST tax.” See Department of the Treasury, “General Expla-
26
“Legal title” is in the trustee as opposed to equitable owner- nations of the Administration’s Fiscal Year 2014 Revenue
ship, which is a right to enjoy trust assets, but not own them. Proposals” (April. 2014), pp. 143-44. However, this particu-
27
As discussed above, a beneficiary with a special power of lar proposal is not likely to be enacted in the near term.
appointment is not exposed to estate tax on the assets in 32
See Schoenblum, 2014 Multistate Guide to Estate Planning,
the trust. See supra note 17 and accompanying text. As for (CCH, 2013), Table 14.
when a power is a general power rather than a special 33
For example, a 6% tax on $1 million requires a payment of
power, see infra note 53 and the text accompanying note
$60,000. Had that $60,000 not been taxed and instead had
64.
28
been invested at 3% after income tax, it would double in 25
See supra text accompanying note 5. years. If it were free to accumulate at the same after-tax rate
29
The rate was approximately 3.6 per 1,000 in 2011, whereas over the course of 100 years, it would equal $1,119,532. By
the marriage rate was 6.8 per 1,000. See CDC, National increasing the return to 4%, the appreciated value would be
Marriage and Divorce Rate Trends (2012) at $2,913,747 and, at 5%, $7,514,358.
152 PRACTICAL TAX STRATEGIES OCTOBER 2013 DYNASTY TRUSTShowever, changes in circumstances require flexi- as high as sometimes advertised, 29 it is still a
bility over time. Attitudes commonly change in real risk with liability for spousal mainte-
tandem with the altered circumstances of the nance and division of property not contin-
client’s descendants and the demands of the out- gent upon “fault,” and often turning on a
side world, notably taxes, but also changes in the judge’s or jury’s whim. Likewise, professional
economy, lifestyles, and family situations. The malpractice litigation is out of control in
trust affords a means whereby these circum- many states. The responsible child who be-
stances can be taken into account and appropriate comes a successful professional may not
alterations made in the control, distributional, and only watch helplessly as his or her assets are
investment aspects of the estate plan. Change can depleted or eliminated, but may also be de-
be effected without tax penalty and by the very prived of assets inherited outright from par-
beneficiaries whose lives are being affected. In- ents. The same unfortunate fate might await
deed, the trust is the most efficient, flexible, pro- the child who is a successful entrepreneur, as
tective, and adaptable means for long-term private a result of a business site injury that insur-
wealth management available. ance may not cover. The insurance may be
Because flexibility to accommodate the un- insufficient, or the insurer may balk and call
known is a primary objective, the governing in- into question coverage. By employing a
strument should incorporate provisions that trust, the inheritance for a beneficiary, re-
enable modification over time, while still pre- gardless of profile, is preserved, entirely in-
serving tax and asset protection benefits. This sulated from claimants of all stripes.
can best be achieved by granting “special pow- Tax savings. For many estates, as of 2013,
ers of appointment”27 to the primary benefici- federal estate taxes are not presently a con-
ary to essentially “re-write” the disposition. The cern. 30 Nevertheless, a longer view is in order.
primary beneficiary, as donee of the power, can The law may change in the future, affording
be empowered to alter the timing of distribu- less shelter. The recent history of the estate tax
tions or even the identities of the other benefi- should not instill confidence as to the current
ciaries, just like he or she could have done if the law’s permanence. A third certainty, “tax re-
property was owned outright, provided that form,” has been added to the two theoretical
this latitude is not granted in the form of a gen- certainties, “death” and “taxes.” 31 Thus, it is
eral power of appointment. This authority to foolish to believe that at each generational
restructure controls, distribution, and invest- level the extensive shelter currently afforded
ment policy can be passed down to the primary will continue to be available. Moreover, even
beneficiary at each succeeding generation, thus apart from the federal estate tax, a number of
overcoming perhaps the greatest concern re- states impose their own estate tax or inheri-
garding dynastic trusts—their ability over an tance tax, and even generation-skipping
extended period to adjust to changing or un- transfer tax. 32 Although the maximum mar-
foreseen circumstances. ginal rates imposed by the states are not as
Creditor protection. The moment a portion high as the federal estate tax, imposition of
of the estate is received outright by a benefici- transfer tax at each generation level is a real
ary, there will be no protection, presently or in drag on wealth accumulation. 33
the future, against the claims of that benefi- A beneficiary-controlled dynasty trust
ciary’s creditors, hungry to devour the inheri- avoids this problem and is now all the more ap-
tance. Had the property still belonged to the pealing because of the estate tax exemption
decedent, the assets would have been untouch- limits discussed above that allow contribution
able. This protective environment is replicated to a trust without transfer tax cost. These
by the trust, which essentially replaces the par- amounts can appreciate astronomically over
ent in retaining legal ownership, whereas use time, especially if treated more as a family asset
and enjoyment of wealth is available unfettered pool than as a source to fund consumption, all
in the case of the responsible beneficiary and the while remaining free of federal and state
only under propitious circumstances in the transfer tax in perpetuity.
case of the less trustworthy beneficiary. In addition to transfer tax, there is the
As has been previously mentioned, 28 question of income taxation. At the federal
claimants can emerge without prior notice. level, there has been considerable bracket
Even a thoroughly responsible beneficiary compression, especially with respect to
can fall victim. While the divorce rate is not trusts, with the maximum marginal rate of
DYNASTY TRUSTS OCTOBER 2013 PRACTICAL TAX STRATEGIES 15339.6% reached at a mere $7,500 of taxable repetitive drain that diminishes returns on
income. 34 However, to the extent that the investment annually in terms of periodic in-
trustee has discretion to make distributions, come. One solution to the state income tax
the additional income tax cost associated drain is to situate the trustee and trust ad-
with the use of a complex trust can be re- ministration in one of the states that does
duced and even eliminated. 35 Nonetheless, not impose an income tax and to make sure
in many instances, if the beneficiary owned that the jurisdictional bases under the law of
the underlying property outright, the in- the home state for taxing do not apply. 40
come associated with the property would While there may be resistance to making the
have incurred the same tax. This might be situs of the trust out-of-state, the state in-
the case because the beneficiary is already in come tax benefits that accrue may be signif-
the highest marginal income tax bracket on icant enough to justify taking this step. 41
account of his or her other income (and a Avoiding complexity. One of the justifica-
spouse’s income if married). The beneficiary tions for an outright disposition by a simple
might be a minor under age 19, in which will is that it avoids complexity. In one sense,
case the income is taxable at the parent’s this is true. However, it fails to take account of
maximum marginal rate pursuant to the the complexities in the long-term that are likely
kiddie tax. 36 Alternatively, the beneficiary to result, creating problems that may prove in-
might be a student and under the age of 24. 37 tractable. The trust-centered planning pro-
At the state level, income tax must be posed by this article is only marginally more
taken seriously. Numerous states impose complex than the simple will, but largely neu-
considerable tax burdens on top of the fed- tralizes the long-term complexities that “simple
eral income tax. 38 This imposition can be es- wills” fail to address. On the other hand, the
pecially onerous on capital gains 39 when an trust-centered planning proposed is consider-
entrepreneur goes public or otherwise dis- ably less complex in drafting and administra-
poses of low-basis assets that have dramati- tion than the traditional trust format examined
cally appreciated. State income taxes are a later in this article.
34
Section 1(e); Rev. Proc. 2013-15, 2013-5 I.R.B. 444. This is to “Using DINGs, NINGs and Other Trusts To Reduce or Elimi-
be contrasted with married individuals filing jointly, an unmarried nate State Income Taxes,” 39th Annual Notre Dame Tax &
individual, or a head of household, with respect to all of which the Estate Planning Institute (10/18/13).
39.6% rate does not kick in until taxable income of $250,000. 41
If the trust is a directed trust, whereby the out-of-state inde-
Whereas an individual filing a joint return will owe $58,813 at pendent trustee simply holds title and investments are left to
$250,000 taxable income, a trust will owe $97,357.80 on the the primary beneficiary co-trustee, the out-of-state trustee’s
same taxable income. Moreover, the additional 3.8% tax under fee will be considerably reduced. See Dukeminier and
ATRA beginning in 2013 kicks in, in the case of a trust, when Sitkoff, supra note 7, at p. 654 n.106.
undistributed net investment income exceeds $11,950. With re- 42
spect to the other taxpayers referenced above, it does not kick The key to proper estate planning, as opposed to business
in until the $450,000 and $400,000 taxable income levels. succession planning, is the process of selling the appropri-
35
The high-income tax bracket trust can make distributions to ate “standardized tools.” See Allen, “Motivating the Business
the low-tax-bracket beneficiary. Of course, this undercuts Owner to Act,” in ALI-ABA, Estate Planning for the Family
some of the appeal of accumulation trusts. See U.S. Trust, Business Owner 3, 9 (3/15/01).
43
Tax Alert 2013-02. On balance, though, the drag is likely to See Caverly, “Drafting Trust Provisions-Is that Abuse or Dis-
be minimal when compared to the benefits. cretion?,” Estate Planning in Depth, ST042 ALI-ABA 277
36
See Section 1(g)(2)(A)(ii). The kiddie tax imposes the parent’s (6/17-22/12).
tax rate on unearned income above a certain threshold even 44
This format is either in the form of an independent trustee
if the source of the income was a gift from the grandparents with dead-hand controls (which is often viewed as reprehen-
of the income-producing asset. See Section 1(g)(4). But, the sible by the beneficiaries) or instead the beneficiary himself
first $2,000 of a child’s unearned income incurs only $100 in or herself serving as the sole trustee.
federal income tax, an effective 5% rate. 45
37 See supra note 12. This is typical with the only difference
See Sections 1(g)(2)(A)(ii) and 152(c)(3)(A)(ii).
38
among trusts of this genre being the ages when outright dis-
For example, California’s maximum rate of tax is 12.3%, with tributions are made to the settlor’s children.
an additional 1% for taxable income in excess of $1 million, 46
thereby representing the top rate in the nation. See Cal. Rev. The Delaware Tax Trap can occur when a non-general
& Tax Code § § 17041, 17043. Other states also impose power of appointment is exercised to create a general
exacting rates such as New Jersey with a top rate of 8.97% power of appointment. Under Sections 2041(a)(3) and
on income in excess of $500,000, while New York State has 2514(d), the property subject to the power, to the extent ex-
a top rate of 8.82% on income over $1 million potentially in ercised, will be included in the gross estate of the power-
addition to a New York City top rate of 3.876% on income holder or be subject to gift tax. See Akers, “Estate Planning:
over $500,000. Current Developments and Hot Topics,” Estate Planning for
39
Almost all states tax capital gains at the same rate as other the Family Business Owner, CU004 ALI-ABA 217, 273-75
income. (7/10-12/13). Sometimes the Delaware Tax Trap, in precipi-
40
See Nenno, “Bases of State Income Taxation of Nongrantor tating tax liability, can prove a net benefit. See Blattmachr
Trusts,” (6/4/13),available at www.actec.org/public/Docu- and Pennell, “Using ‘Delaware Tax Trap’ to Avoid Genera-
ments/studies/Nenno_state_nongrantor_tax_sur- tion-Skipping Taxes,” 68 J. Tax. 242 (April 1988).
47
vey_06_04_13.pdf. See also Schoenblum and Schoenblum, See supra text accompanying note 29.
154 PRACTICAL TAX STRATEGIES OCTOBER 2013 DYNASTY TRUSTSDrafting approaches inception. Relying on decanting is for existing
Assume then that the client wisely chooses to use trusts and not newly created trusts.
a trust to own assets after death rather than make The modern trust format is a fully discre-
an outright disposition to the intended beneficiar- tionary trust that is irrevocable and, yet,
ies. Despite wishing to keep it simple, the client is amendable. Broad special powers of appoint-
likely to expect a customized document that ad- ment are granted to the primary beneficiary
dresses what he or she believes are the unique cir- and subsequent primary beneficiaries for the
cumstances dictated by his or her wealth, family, purpose of rewriting the trust over time. The
and goals. Too much customization may not be a trust is essentially controlled by the beneficiary,
virtue, however.42 Indeed, the more customized but with certain safeguards to assure that no
the plan, the more expensive it is, and it can limit one can successfully attack the trust. The trust’s
flexibility. It is also more prone to error—the administration is ideally situated in a “trust-
process of crafting a personalized trust is rife with friendly” jurisdiction, i.e., a jurisdiction the
the risk of inadvertent errors, oversights, and fail- laws of which are particularly biased in favor of
ure to coordinate fully all of the operational pro- asset protection, have no rule against perpetu-
visions.43 Moreover, novel provisions are often ities or have an extended statutory period, and
untested—there will inevitably be uncertainties assure certain freedom from state income taxa-
and ambiguities associated with such clauses. Cus- tion. Most importantly, the assets are made
tomization can compromise flexibility and tax available for the beneficiary as needed for use
planning objectives. In the authors’ experience, and enjoyment. Because there are not any ben-
most custom adjustments actually harm the bene- eficiary entitlements, there is nothing a
ficiaries rather than aid them, while causing un- claimant can access if proper situs is obtained.
necessary costs and complexities. In other words, The independent trustee can “give” or “not give”
the best trust is the simple trust conceptually—one based on fiduciary and factual constraints.
that, through tried and true clauses, aims to When the specifics of the traditional and
achieve the essence of outright ownership, but modern formats are compared, the striking ad-
with protection against various claimants and fu- vantages of the modern format become appar-
ture flexibility. ent.
Indeed, there are essentially two basic for- The problematic features of the traditional ap-
mats—the traditional, trustee-managed for- proach. The first troubling aspect of the tradi-
mat44 and the more modern beneficiary-con- tional approach is that it exposes beneficiaries
trolled format. These differ dramatically from a down the line to repetitive transfer taxation. For
conceptual standpoint. The traditional trust reasons previously stated,47 this may no longer be
format is premised on pre-specified beneficiary a problem for many clients and their families, al-
entitlements under the administration of a though it remains one for families when one or
third-party trustee who is granted relatively lit- more of the beneficiaries already enjoy significant
tle discretion or on situations in which the ben- wealth of their own or, based on their talents or in-
eficiary is the sole trustee. For example, a bene- vestments, are likely to be in that situation in the
ficiary may be entitled to required periodic future. For example, the beneficiary could practice
distributions of net income (often commenc- in an area with potential for substantial, periodic
ing at a specified age), followed at specified ages earnings leading to a large capital accumulation
by distributions of a share of principal and ac- overtime. A beneficiary may become an investor
cumulated income. The trust then terminates or entrepreneur involved in a business that could
when the trust estate has been fully distributed blossom into a mega-enterprise. As previously
outright.45 The trust is not designed to survive noted, although the current applicable credit
several generations and lacks flexibility. Indeed, amount and reduced maximum marginal rate of
a current “hot” planning technique is to decant the federal estate tax have been described as “per-
many of these trusts to correct a design flaw manent,” few serious observers believe that “per-
after-the-fact. Had the trust been originally de- manent” means “forever.” And there will always be
signed properly, decanting would be unneces- state death tax and state income tax concerns. Dis-
sary. However, decanting has its limitations and cretionary pay-outs permit adjustments as the law
could subject trust assets to the Delaware Tax and tax rates continue to evolve. It is impossible to
Trap.46 Accordingly, the “key” concept at play is project what is “best” without a crystal ball to show
to design the trust efficiently and correctly at its what will occur in the future.
DYNASTY TRUSTS OCTOBER 2013 PRACTICAL TAX STRATEGIES 155There is also the concern about future cred- drawal.50 Its use, however, can result in unsatis-
itors. Required distributions of income and factory income tax consequences51 and raises
principal on the basis of a prescheduled plan complex and unsettled gift and estate tax prob-
puts more in the hands of the beneficiaries, lems, especially since compliance involves
even when not needed, and exposes the distrib- rather arcane paperwork requirements. Those
uted assets to the beneficiaries’ creditors. In- who have had the “pleasure” of addressing “5 or
deed, there is an increasing body of law en- 5” powers in the context of premium payment
abling general creditors, divorcing spouses, and issues associated with irrevocable life insurance
tort creditors to step into the shoes of the ben- trusts can readily appreciate this.52
eficiary unless the trust is properly crafted.48 A typical solution to the problem is to make
A perennial problem encountered when corpus available through reliance on a HEMS
using the traditional format is how to provide ascertainable standard.53 The beneficiary may
access to the assets for a key beneficiary, when, be entitled to a distribution because of health,
for example, the trust’s income is insufficient.49 education, maintenance or support needs.54 The
One solution is the “5 or 5” power of with- standard can be drafted to allow maintenance at
48
See Langa, “Converting Asset Protection to Asset Collec- beneficiary need be taken into account, although this should
tion: A Creditor’s Perspective,” 39th Annual Notre Dame Tax be specified in light of the objective.
55
& Estate Planning Institute (10/18/13). A beneficiary can require the trustee to make such distribu-
49 tions even if the trustee refuses to do so.
With the decline of returns on investment, a beneficiary
56
whose only access to the trust is the mandatory right to net That litigation can be intense and prove costly even to
income, may feel hard-pressed. For example, a $3 million knowledgeable and well-motivated fiduciaries. For example,
trust corpus may yield an annual pay-out to the beneficiary in many jurisdictions the law is not clear, if the matter is not
of only $60,000, a net return of 2%. This would be especially addressed in the instrument, whether other resources of the
the case if the trust instrument imposes limitations, common beneficiary may be taken into account and whether the
in the case of the traditional format, with respect to permis- trustee has a duty to inquire into the beneficiary’s situation.
sible trust investments. See, e.g., Marsman v. Nasca, 573 N.E. 2d 1025 (Mass. App.
50
The “5 or 5” power is set forth in Section 2514(e). To the ex- 1991). Apart from these questions, there is the more practi-
tent of the greater of $5,000 or 5% of the fair market value cal drafting question as to whether or not other resources
of the trust corpus, there will be no gift if the person who has should be taken into account. For an excellent consideration
the power to withdraw property from the trust allows that of this and other drafting issues relating to a discretionary
power to lapse. Thus, in years in which the power is not ex- distribution right limited by an ascertainable standard, see
ercised and the property remains in trust, it will not be Horn, supra note 14.
deemed to have been given as a gift by the donee of the 57
See supra note 14.
power to the beneficiaries of the trust. Were the withdrawal 58
right a greater amount, the excess could result in gift tax or While technically the beneficiary serving as sole trustee is
at least depletion of the unified credit. granted the same protections from creditors as a third party
51 trustee, this is only so long as Uniform Trust Code section
Ltr. Rul. 9034004, 8/24/90. This private letter ruling holds
504(e) applies. In a Uniform Trust Code state, then, it may
that a person who has a “5 or 5” power is deemed the
be possible to dispense with an independent co-trustee al-
owner of a portion of the trust for income tax purposes and
together, so long as the standards governing distributionis
therefore must report income with respect to the portion of
the trust estate associated with the withdrawal right. Upon drafted precisely and is not so broad as to require payments
the failure to exercise the power, it will be deemed a release, for spousal or child support under the standard. Of course,
equivalent to an exercise, and, thus, as if the donee received the narrower the standard is drawn, the less access the ben-
the income. During each succeeding year in which the eficiary will have. Moreover, regardless of the standard, a
power is not exercised, the donee will be treated as the spouse or child may very well have a claim under the Uni-
owner of an increasing portion of corpus of the trust and form Trust Code. Under the common law, there may be even
taxed on the income attributable to such corpus. less protection. See Restatement (Third) of Trusts section
52 60, cmts. a. and g. Indeed, the trend is to reduce the previ-
For a detailed discussion of the various requirements, see
ously-impervious-to-attack “spendthrift” protections. Ac-
Katzenstein and Sellers, “Giving Crummey Notices: Best
cordingly, the authors strongly recommend the use of the in-
Practices,” 150 Trusts & Estates 20 (August 2011).
53 dependent trustee.
The standard is derived from Section 2041(b)(1)(A), which 59
provides that a “power to consume, invade, or appropriate The revocable trust asset is deemed owned by and under
property for the benefit of the decedent which is limited by the control of the settlor as long as the settlor has a power
an ascertainable standard relating to the [H]ealth, [E]duca- to revoke that is exercisable over the property. When the
tion, [S]upport, or [M]aintenance of the decedent shall not property is formally distributed by the trustee to a benefici-
be deemed a general power of appointment.” (Emphasis ary other than the settlor, that ownership and control has
added.) By using the standard, a beneficiary who dies with been surrendered, a transfer has taken place, and, there-
an invasion power limited by the standard will not have the fore, a taxable gift is generated. However, when the trustee
property subject to the power included in the deceased ben- of an irrevocable trust makes a distribution to a beneficiary,
eficiary’s gross estate. Such a limited power is commonly re- the property has already been put beyond the settlor’s con-
ferred to as a “special power of appointment.” A power is trol via a taxable transfer and the beneficiary is deemed to
also a special power of appointment if the donee cannot ex- have beneficial ownership. Thus, there is no basis for finding
ercise it in favor of himself, his estate, his creditors, or the that a second taxable transfer has occurred. In many in-
creditors of his estate. Section 2041(b)(1). Certain powers stances, by making the transfer to the trustee of the irrevo-
exercisable only in conjunction with another person may not cable trust early on, subsequent appreciation of the trans-
be deemed a general power. Section 2041(b)(1)(C). Only ferred assets is removed from the transferor’s gross estate.
general powers of appointment will cause trust assets to be 60
This will turn on which law governs the trust with respect to
included in the gross estate of a beneficiary. the question of perpetuities. See generally Sitkoff and
54
The standard need not be at a minimal level of support, for Schanzenbach, “Jurisdictional Competition for Trust Funds:
example, but instead be at any higher level specified. Fur- An Empirical Analysis of Perpetuities and Taxes,” 115 Yale
thermore, there is no requirement that other resources of the L.J. 356 (2005).
156 PRACTICAL TAX STRATEGIES OCTOBER 2013 DYNASTY TRUSTSa certain station in life, rather than a minimal be a co-trustee along with an independent co-
level. Also, other resources of the beneficiary trustee of his or her choice. The family co-trustee
need not be taken into account. In some tradi- controls business and investment decisions. More
tional trusts, this standard is mandatory.55 In importantly, the family co-trustee controls the
others it is mixed with a grant of trustee discre- identity of the independent trustee because the in-
tion. Considerable caution must be exercised in dependent trustee is subject to removal and re-
drafting the standard to avoid many interpretive placement by the family trustee, as long as another
issues and to assure the intended access. Other- successor independent trustee is appointed.
wise, the use of an ascertainable standard can be The independent co-trustee formally con-
a prescription for litigation between the trustee trols all tax and creditor-sensitive decisions.
and the beneficiary56 as to its scope or as a back- The beneficiary, however, practically controls
door basis for the assertion of creditor and other them because the beneficiary is free to replace
claimant claims.57 the independent co-trustee.58 No HEMS or
There is a real conundrum in drafting the other ascertainable standard is needed or used,
HEMS standard or even whether to use it. A due to the legal and tax issues previously dis-
common goal is to assure distributions for the cussed. Because the independent trustee has
“support” of the beneficiary in the style to total discretion, even a spouse’s and child’s sup-
which he or she is accustomed. Depending on port claim need not be honored, at least where
applicable law and judicial interpretation, the traditional common law reigns. This is also
which is not always predictable, creditors may true under the Uniform Trust Code, because
be able to gain access because of the ‘support’ the trustee cannot be required to distribute
they are providing. A purely discretionary more than is required, as long as the trustee is
trust, without HEMS, has a much better chance not abusing its discretion.
of insulating the trust assets from the creditors’ As for distributions, they are not scheduled
reach. However, this has a perceived drawback. as in the case of the traditional format. Rather,
It puts a third party, as an independent trustee, they are made available on a use-and-enjoy-
in control. Nevertheless, giving the primary ment basis in the best interest of the beneficiar-
beneficiary the right to remove and replace the ies. There are no pre-selected mandatory distri-
independent trustee will give the primary ben- bution points in time with respect to either
eficiary indirect control once he or she under- income or principal. By keeping the assets in
stands the simplicity of firing the independent the trust wrapper, they are insulated from
trustee and the broad range of available re- “predators” and control is maintained. Indeed,
placement trustees. the “use” trust is similar to the commonplace
The modern beneficiary-controlled trust format. standard revocable trust. However, unlike that
How does the modern trust format address these genus of trust, there need be no concern about
issues and deliver on the client’s wish list? To begin taxable gratuitous transfers upon distribution.59
with, a beneficiary can have more “control” than Unlike the traditional trust format, the “use”
the creator of a trust. Effectively, a responsible trust can be long-term and has the potential to
beneficiary is given “full control,” that is, the max- last forever.60 Indeed, excessive distributions
imum control permitted without exposing the under the modern trust format are discour-
beneficiary to the federal estate tax and other po- aged, unless there is an income tax savings or
tential claimants. As for the less responsible bene- other compelling reason to make them. When
ficiaries, control can be calibrated to take account distributions are made, they are primarily for
of the known deficiencies associated with, at least, support and consumption purposes, so that
existing beneficiaries. There are several types of there is no property outside the trust wrapper,
control—administrative, use and enjoyment, and which would then be exposed to the predators
dispositive. These aspects of control are always identified earlier. For example, a beneficiary
subject to modification by the primary benefici- can even be granted the rent-free use of the
ary through a special power of appointment so family vacation home. Rent-free use of an asset
that an incapable, irresponsible, contentious, or in a beneficiary-controlled trust is the func-
unneedy beneficiary can be reined in. To replicate tional equivalent of personal ownership with-
the “outright” option, the trust separates into out the exposure to claimants that ownership
shares for each branch of the family, with separate entails.
subtrusts being established on a per stirpes basis. The trust is recycled from generation to gen-
Within each subtrust, a primary beneficiary can eration, subject to amendment by the special
DYNASTY TRUSTS OCTOBER 2013 PRACTICAL TAX STRATEGIES 157You can also read
