Also known as a dynasty trust or wealth trust, a legacy trust is an irrevocable trust that lets the trustor set aside assets for future generations. It is generally considered to be a flexible asset protection and saving option that allows one to use funds for emergency situations while building an estate to pass on to heirs.
With a legacy trust, the creator of the trust (the “trustor”) cannot also be the trustee; instead, one must be appointed. When the trustor dies, the trustee can then manage and distribute the legacy trust assets.
The primary benefit of a legacy trust is asset protection. For example, if a child or grandchild is named as a beneficiary of legacy trust, his or her creditors, soon-to-be-ex-spouse or other friends looking to borrow money would not be able to reach into that trust. All distributions are handled by a separate trustee. There are tax benefits, and the legacy trust is not subject to the same IRS rules as a traditional estate. With the exception of assets transferred at the time of death, the legacy trust is not subject to probate or administered with court supervision. Thus, activities associated with the trust assets are kept confidential and out of the public record.
Setting up a legacy trust is a complex undertaking, and requires the proper expertise and estate planning experience. Even if you’re familiar with trusts in general, there are several tax and legal issues unique to legacy trusts that you are likely unfamiliar with.
Our office has the knowledge and experience you need to help you understand your choices and make informed decisions. Please contact us online or by phone at (517) 548-7400 in Livingston County and (586) 751-0779 in Macomb County if we may be of assistance.