He’s made a move—President Obama’s recently submitted 2012 budget proposal would limit the existence of Dynasty Trusts to 90 years. Obviously, trusts could still go on longer; however, under this new proposal federal transfer tax exemptions would be lost after 90 years.
A Dynasty Trust, often called a Legacy Trust or a Generation Skipping Transfer (“GST”) Trust, is a special type of irrevocable trust settled for the benefit of one’s descendants. Because of certain federal tax exemptions and estate planning techniques now available, these trusts can be established so that assets placed within them will never be subject to federal estate, gift, and GST tax again. In Nevada, such trusts can exist for up to 365 years.
If someone would like to set up a Legacy Trust, it’s time to move quickly. President Obama’s proposal would affect new transfers to Dynasty Trusts, but not trust fundings that have occurred prior to enactment. That is to say, if someone sets up and funds a Nevada GST Trust before the law is passed, such trust would be “grandfathered in” and therefore be exempt from the payment of transfer taxes for the next 365 years.
Remember, with estate planning the key words are “sooner versus later” and “old and cold”. The time to act is now! For a more in depth review of Obama's proposal, see the Wall Street Journal article by Laura Saunders, http://on.wsj.com/dLAb3u.