Law Office of Thomas J. Swenson
Integrated International Asset Protection, Wealth Building and Estate Planning Intellectual Property
A dynasty trust, also known as a GST, legacy or perpetual trust, is a flexible vehicle that can provide asset protection, wealth management and wealth accumulation for many generations, or even perpetually. In making contributions to a dynasty trust, an individual’s (or married couple’s) exemptions for gift taxes and generation-skipping taxes are utilized to insulate trust assets and distributions against gift and estate taxes forever — a good way to protect family businesses and hard-earned family wealth against punitive, profligate tax collectors.
When trust assets (e.g., cash, stocks, bonds, business entities) are invested in a private placement life insurance (PPLI) policy (min. premium commitment usu. $1 million), no income or capital gains taxes are paid on investment growth. Accordingly, trust assets in the life insurance wrapper can grow and be distributed to beneficiaries completely free of taxes perpetually. In contrast to foreign PPLI, domestic PPLI requires a minimum premium commitment of $5 million or more, only in cash, and is subject to state-imposed investment restrictions.
An alternative to PPLI is a foreign deferred variable annuity (DVA), which may be obtained for a minimum premium commitment of $250,000.
For the years 2011 and 2012, the individual lifetime gift and estate tax exemption is $5 million. Unfortunately, if the craven politicians of both major U.S. political parties increase estate and gift taxes (cf. Obama’s “Buffett Rule”), future dynasty trusts could be eviscerated. If a dynasty trust is already established, however, it will (presumably) be protected against prospective changes in the tax laws.
For more detailed info, please consult the articles listed on this website page, or contact this office for a free consultation.
Please see additional information below, or download here.
Irrevocable Life Insurance Dynasty Trust – Basics 
Private Placement Life Insurance (PPLI) — Asset protection and Tax-Free Investments
Irrevocable Life Insurance Trusts Utilize Gift and Estate Tax Exemptions
Self-Settled Asset Protection Trust
Irrevocable Life Insurance Dynasty Trust– Basics
Summary: An irrevocable life insurance trust (ILIT) comprises two main parts: (1) an irrevocable asset protection trust; and (2) a life insurance policy owned by the trust. An international ILIT is better than a domestic ILIT because it is more flexible and less expensive. Private placement life insurance (PPLI) serves as a “wrapper” around a global, variable investment portfolio that grows free of income and capital gains taxes. At the trustee’s discretion, the trust may access policy cash value by withdrawals and tax-free loans during the life of the insured. The trust settler (grantor) may also be a beneficiary. Upon death of the insured, PPLI proceeds are paid into the ILIT free of income and estate taxes.
Private Placement Life Insurance (PPLI) – Asset Protection and Tax-Free Investments for the Moderately Wealthy
Summary: An offshore tax-free asset-protection life-insurance dynasty trust is useful not only for the wealthy. In full compliance with U.S. tax laws, an individual or a couple having a net worth of about $1 million to $5 million can fund an offshore asset-protection life-insurance dynasty trust that provides a life insurance benefit, tax-free growth of a variable high-yield investment portfolio, tax-free policy loans during the life of the insured, tax-free payment of policy proceeds to the trust upon death of the insured and tax-free distributions to beneficiaries.
Irrevocable Dynasty Trusts Utilize $5 Million Exemptions for Gift, Estate and Generation Skipping Transfer Taxes
Summary: For calendar year 2012, the lifetime federal gift and estate tax exemption and the generation-skipping transfer tax (GSTT) exemption are both set at historically high values of $5.12 million. In 2013, these exemptions are scheduled to go back down to $1 million. Year 2012 might be the last opportunity for individual United States taxpayers to move millions of dollars into an irrevocable dynasty trust without incurring punitive gift taxes, and to ensure that future generations of trust beneficiaries receive benefits free of GST taxes.
Self-Settled Discretionary Asset Protection Trust Not Part of Estate
Summary: An IRS ruling provided some clarity and reassurance to US taxpayers who want to be beneficiaries of a self-settled, irrevocable, discretionary asset protection trust. In Private Letter Ruling (PLR) 200944002, the IRS ruled that assets in an asset protection trust were not includable in the grantor’s gross estate even though the grantor was a beneficiary of the trust.