The overhaul of the tax system has lowered the rates on some and raised rates on others. It’s much too complex to give sweeping thumbs up or thumbs down for many groups. But an article in Bloomberg has pointed out that a new law doubles the amount of wealth that can be passed to an heir, raising it to $22 million without having to pay estate or gift taxes. As of now, however, there is a window until 2025 where this can be done.

Planning really far ahead

This has led some wealthy families to use dynasty trusts to provide financial support for grandchildren, great-grandchildren and even subsequent generations. Bloomberg goes on to point out that a dozen of the top wealth planners claim they are seeing an increase in requests for these kinds of trusts. The belief is that these laws will not stay in effect if the Democrats retake the majority in the Senate and House, so now is the time to create that long-term legacy.

Billions at stake

While this law seemingly would apply to the super-rich or top .1 percent, the concentration of wealth amongst a few thousand families could add up to billions of dollars. It will also further solidify the trend of consolidating the wealth among a select but growing number of families.

How it works

These so-called perpetuities must be set up in particular states — Ohio is not currently one of them – but lawmakers in different states are making changes to accommodate this trend. Popular states currently include Delaware and Florida.

The trustee can oversee the dispersal of funds tied to the guidelines of the trust. So just as with any other trust, this one can release funds for a first house, education or other specific reasons. On the other hand, it can be tied to the age of the heir.

While trusts require a certain amount of money to maintain, these changes in the laws until 2025 make it more appealing.

Trusts may work lower income bracket as well

Trusts can be an effective way to pass wealth along to beneficiaries. The main reason for creating one is that it avoids the expense of the probate process and legally avoids paying many estate law taxes. While dynasty trusts address one need, trusts can address any number of goals. An attorney with estate law experience can help determine if this is a wise choice in the estate planning process.