A Dynasty Trust is a trust settled with the primary purpose of transitioning wealth from one generation to one or more future generations. An irrevocable Dynasty Trust simply implies that gifts made by the Grantor to the trust are not distributable back to the Grantor at the Grantor’s discretion, but rather controlled by fiduciaries appointed by the Grantor to protect and manage for the benefit of the trust’s beneficiaries, often the Grantor’s U.S.-based descendants or relatives.

Few vehicles can compare to a U.S. Dynasty Trust when it comes to passing down familial wealth from one generation to future generations. This is especially true in countries with a transfer tax (a tax on wealth transfers between individuals). Transferring wealth in the U.S. is especially pricey, generally costing 40% or more of the wealth being transferred either through a gift tax or through an estate tax. As such, Wealth Creators based in the U.S. often must consider ways to maximize their lifetime gift and estate tax exemption ($13.61 million for individuals and double for married couples in 2024).

Fortunately for first generation non-U.S. Wealth Creators, the U.S. tax code has built in certain exceptions from U.S. transfer taxes. In addition, they may also be exempt from U.S. income tax if income derived is sourced from non-U.S. sources. When properly structured, a Dynasty Trust should serve the purposes of transferring wealth and minimizing transfer taxes.