Boland Law Group, PLLCPassionately Preserving Wealth™
Dynasty and generation-skipping trusts
Dynasty trust attorneys in Arizona
Boland Law Group designs dynasty trusts and generation-skipping trusts that carry a family's wealth to children, grandchildren and beyond without estate or GST tax at each death, drawn by LL.M. partners admitted to the United States Tax Court, on a fixed fee published before you call.
What a dynasty trust is
A dynasty trust is an irrevocable trust built to last for generations rather than end when your children inherit. You fund it during life or at death, allocate your generation-skipping transfer (GST) tax exemption to it, and the trust then holds the assets for your children, their children and later descendants on the terms you set.
The design answers a tax most families do not see coming. Wealth left to children outright is taxed again in their estates, at 40 per cent above their own exemption, and again in their children's. Leaving it straight to grandchildren does not avoid that, because the GST tax exists to collect the tax the skipped generation would have paid. A dynasty trust with GST exemption allocated at funding has an inclusion ratio of zero, and it is drafted so that no beneficiary's interest is included in that beneficiary's estate. Nothing in it is then subject to estate or GST tax at any later death, however much it has grown.
It also does what an outright gift cannot. The trustees you choose manage the assets, a spendthrift clause keeps each share away from a beneficiary's creditors, and property the trust holds belongs to the trust, not to the beneficiary. A dynasty trust is one of the irrevocable trusts we draft, and it rests on the same foundation as the rest of your estate plan.
| Question | Left outright | Held in a dynasty trust |
|---|---|---|
| Estate tax at your child's death? | Yes, 40 per cent above the child's own exemption | No, when GST exemption was allocated |
| Estate tax at your grandchild's death? | Yes, again | No, for as long as the trust lasts |
| Reachable by a beneficiary's creditors? | Yes | Generally no, under a spendthrift clause |
| At risk in a beneficiary's divorce? | If it is commingled with marital property | Held by the trust, not the beneficiary |
| Who manages and spends it? | The beneficiary | Trustees you choose, under standards you set |
| Step-up in basis at the beneficiary's death? | Yes | Generally no, unless selected assets are drawn into that estate |
Who needs a dynasty trust, and at what net worth
The trust is built around the GST exemption, so the numbers that matter are your children's estates as well as yours.
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Couples with $10 million or more who will leave more than their children spend
The wealth will outlive the next generation, so the question is whether it is taxed at each death along the way. See high net worth estate planning.
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Business owners before a sale or recapitalization
Shares moved into the trust before a liquidity event carry all of their later growth outside every future estate. See business owners.
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Families already using part of their exemption
A SLAT, ILIT or IDGT can carry dynasty terms from the start, so exemption used once shelters every later generation.
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Parents whose children already have wealth of their own
An outright inheritance only adds to an estate that will be taxed again.
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Families who want a structure, not just a transfer
Trustee succession, a distribution policy and a trust protector give later generations a way to decide together. See multi-generational families and family offices.
In 2026 the federal estate, gift and GST exemptions are each $15,000,000 per person and $30,000,000 for a married couple, indexed from 2027 with no scheduled sunset. The rate above them is 40 per cent. Arizona adds no estate or inheritance tax.
The GST exemption works differently from the estate exemption. A surviving spouse can inherit a deceased spouse's unused estate exemption through portability, but not the unused GST exemption. Each spouse's GST exemption is allocated in life or at death, or it is lost, which is why couples well below $30 million still use dynasty trusts.
We advise clients across the Valley and northern Arizona, most often from Scottsdale, Paradise Valley, North Scottsdale and Carefree. Family office staff and financial advisors can bring us a matter directly.
How a dynasty trust is built
Eight decisions shape every dynasty trust we draft. Each is made once, at signing, for a trust that may outlast everyone in the room.
| Path | You | Your children | Grandchildren | Great-grandchildren |
|---|---|---|---|---|
| Left outright | $1.00Gift sheltered by your exemption | $1.00Received in full | $0.60After estate tax at your child's death | $0.36After estate tax at your grandchild's death |
| In a dynasty trust | $1.00GST exemption allocated once | $1.00Held in trust | $1.00No estate or GST tax | $1.00No estate or GST tax |
Before growth, which is the same on both paths. Assumes each beneficiary's own exemptions are used by their own estate, the 40 per cent federal rate, and no change in law.
- GST allocation
- Trustees
- Protector
- Distributions
- Grantor status
- Appointment powers
- Funding
- Combinations
Allocating GST exemption
The trust's value rests on one election. We allocate GST exemption on the Form 709 for the year of the gift, so the trust's inclusion ratio is zero at the value of the gift. We elect affirmatively rather than rely on the automatic allocation rules of IRC § 2632(c), which can miss a trust that does not fit the statutory definition.
A late allocation is measured at the trust's value when the allocation is made, not when the gift was, so a missed election costs exactly the growth it was meant to protect. Relief under IRC § 2642(g) exists, by private letter ruling, at real cost.
From $40,000 standalone dynasty trust, memorandum for your Form 709 included
The trustee bench
A trust meant to last a century needs its own succession plan. We name family trustees for distribution decisions, a professional or corporate trustee where the assets call for one, and the order in which each is replaced. Arizona lets the instrument give an investment advisor the power to direct the trustee, so the portfolio and the family decisions can sit with different people (A.R.S. § 14-10808).
A trust protector
Tax law will change many times over the trust's life. Arizona lets the instrument name a trust protector who can remove and replace trustees, amend the trust to respond to changes in tax or state law, adjust powers of appointment and change the law that governs the trust, without a court petition (A.R.S. § 14-10818). The trustee can also move the trust's place of administration to another state (A.R.S. § 14-10108). Unless the instrument says otherwise, the protector is not a fiduciary. We keep the protector independent of the family and bar any power that would cause estate inclusion.
Distribution standards
A family trustee distributes under an ascertainable standard, health, education, maintenance and support, which keeps the trust out of that trustee's own estate. An independent trustee can hold broader discretion, guided by a written statement of your intent.
The trust can also make assets available rather than hand them over. A home the trust owns and a child lives in, or a loan on stated terms, gives the family the use of the wealth while it stays outside every estate, which a cash distribution does not.
Grantor trust status and the swap power
Most dynasty trusts are drafted as grantor trusts. You pay the trust's income tax, which the IRS does not treat as a further gift (Rev. Rul. 2004-64), so the trust compounds without tax drag while your estate shrinks. Grantor status can be switched off later by releasing the power that creates it.
A power to swap trust assets for others of equal value, respected for estate tax under Rev. Rul. 2008-22, lets you bring low-basis assets back into your estate before death so they receive a step-up.
Powers of appointment
Assets in the trust get no step-up when a beneficiary dies. Where a child's own exemptions have room, an independent person can give that child a formula general power of appointment over selected low-basis assets, drawing only those assets into the child's estate, sheltered by the child's unused exemptions, for a step-up. The formula is written so that it never creates tax.
Limited powers of appointment let each generation redirect its share among descendants as circumstances change.
What goes in, and when
Growth assets belong in a dynasty trust: business interests before a sale, a family LLC or partnership, concentrated stock, or a life insurance policy. Discounts for lack of control and marketability on entity interests can stretch the exemption further, with a qualified appraisal attached to the return.
Annual exclusion gifts to a multi-generational trust do not carry a zero inclusion ratio on their own under IRC § 2642(c)(2), so GST exemption is allocated to them as well.
From $45,000 family LLC or FLP formation, with valuation coordination
More: QSBS stacking with trusts and planning before a business exit
Dynasty terms inside other trusts
The dynasty design is a set of terms, so it can sit inside trusts you already need. A spousal lifetime access trust can continue as a dynasty trust for your descendants after your spouse's death. An irrevocable life insurance trust can hold survivorship coverage for generations. A trust created at your death under your revocable trust can receive your remaining GST exemption on the estate tax return.
From $35,000 SLAT, $10,000 survivorship ILIT
More: SLATs, ILITs and revocable living trusts
How dynasty trusts work in Arizona
Federal tax law decides what the trust saves. Arizona trust law decides how long it lasts, who can change it and whom it protects.
A 500-year vesting window
A trust interest may wait up to 500 years to vest, so a dynasty trust drafted here can serve many generations without a forced ending. A separate provision permits trusts with no fixed end when its conditions are met.
A.R.S. § 14-2901(A)(2), (A)(3)
No state estate tax, a low trust income tax
Arizona levies no estate or inheritance tax and taxes a resident trust's income at a flat 2.5 per cent, so most Arizona families have little tax reason to site the trust in another state.
A.R.S. § 43-1311
Protectors and directed trustees
The instrument can name a trust protector to update the trust and its governing law as the law changes, and an advisor to direct investments, and the trustee can move the trust's administration to another state, so a long-lived trust can adapt without a court petition.
A.R.S. §§ 14-10818, 14-10808, 14-10108
Protection at every generation
Arizona enforces spendthrift clauses, so each beneficiary's share is shielded from most creditors, with narrow exceptions such as child support. A trustee can also decant into a trust with better terms. See trust modification and decanting.
A.R.S. §§ 14-10502, 14-10503, 14-10819
One Arizona question we draft around
In 2018 the Arizona Attorney General issued Opinion I18-006, concluding that the 500-year rule and the perpetual trust provision likely conflict with the Arizona Constitution's ban on perpetuities. An Attorney General opinion does not bind the courts, and we are aware of no Arizona decision striking either provision. We plan for the question anyway: each dynasty trust carries a savings clause that ends every share within the traditional perpetuities period if the longer periods are ever lost, and a protector power to change the law that governs the trust, alongside the trustee's power to move its administration to another state.
The risks, and the tax filings that come with them
A dynasty trust is tested decades later, by a trustee's CPA reading the gift tax returns you filed. We draft for that reading. Both partners are admitted to the United States Tax Court, and the firm keeps an active tax controversy practice.
- A missed or muddled allocation
Without a clear GST allocation on a timely Form 709, the trust can end up with an inclusion ratio above zero, and every later distribution to a grandchild carries a share of the 40 per cent tax.
- Community property funded without a plan
A gift of community property is treated as made half by each spouse, so each spouse is the transferor of half and must allocate GST exemption to it. If either spouse can benefit from the trust, it is funded from separate property after a written partition.
- Allocating while assets could come back
GST exemption cannot take effect while the assets could still be included in your estate, the estate tax inclusion period of IRC § 2642(f). A GRAT or QPRT remainder is poured into the dynasty trust when its term ends.
- Retained strings
A retained right to income, use or control pulls the assets back into your estate under IRC §§ 2036 and 2038, and a beneficiary serving as trustee without an ascertainable standard can pull them into their own.
- Low-basis assets at death
Assets outside your estate get no step-up (IRC § 1014; Rev. Rul. 2023-2). The swap power and formula powers of appointment are how the trust recovers basis.
- A trustee plan that runs out
Long trusts fail quietly when the named trustees are gone and no one holds the power to appoint the next. The bench and the protector are drafted to outlast everyone named.
| Filing | When | Who |
|---|---|---|
| Form 709, with the GST exemption allocation | April 15 after the year of the gift. Each spouse files for a gift of community property | Your CPA, from our reporting memorandum |
| Form 1041 and Arizona Form 141AZ | Each year it meets the federal or Arizona filing threshold, once it is a non-grantor trust | The trust's CPA |
| Grantor trust reporting | Each year, on your own return, while grantor status lasts | Your CPA |
| Form 706, allocating GST exemption to trusts created at death | Nine months after death, six-month extension available | The executor and CPA, with our counsel |
| Form 706-GS(D-1) | April 15 after each year the trust distributes to a skip person, such as a grandchild, even when the inclusion ratio is zero | The trustee, with a copy to the beneficiary |
| Form 706-GS(D) | April 15 after the distribution, only if the inclusion ratio is above zero | The beneficiary who received it |
| Form 706-GS(T) | April 15 after a taxable termination, such as the end of the last child's interest | The trustee |
We do not prepare gift tax returns. Every dynasty trust engagement includes a memorandum for your return preparer covering adequate disclosure, gift-splitting and GST exemption allocation. Our trust administration practice supports trustees with the annual notices.
What a $15 million dynasty trust keeps in the family
Consider a North Scottsdale couple in their sixties with $45 million and two children who are already financially secure. In 2026 they give $15 million of community property for the children. They can give it outright, or to a dynasty trust with $7.5 million of each spouse's GST exemption allocated. Both gifts use the same $15 million of gift exemption and remove the same growth from the parents' estates, so the difference between the two is the dynasty design alone.
Forty years later, at 5 per cent a year, the gift has grown to about $105.6 million. Left outright, it sits in the children's estates when they die, and because their own exemptions are already used by their own wealth, all of it is taxed at 40 per cent. Held in the trust, none of it is.
Two effects are left out, and both favor the trust. While it is a grantor trust, the parents pay its income tax, which shrinks their estate without counting as a gift. And the arithmetic repeats at each later generation: as the track above shows, a dollar left outright keeps 36 cents after two taxed deaths, while the trust keeps the dollar. The trade is basis, which the swap power and formula powers of appointment address.
The exemption figures come from the 2025 tax law. See our notes on the exemption changes, why planning still matters and children’s trusts for lifetime planning.
| Line | Amount |
|---|---|
| Given to the children outright | |
| Gift in 2026, gift exemption used | $15,000,000 |
| Value at the children's deaths, year forty, 5 per cent growth | $105,600,000 |
| Federal estate tax at 40 per cent | $42,240,000 |
| Passes to the grandchildren | $63,360,000 |
| Given to a dynasty trust, GST exemption allocated | |
| Gift in 2026, $7,500,000 of GST exemption from each spouse | $15,000,000 |
| The trust at year forty | $105,600,000 |
| Estate or GST tax at the children's deaths | $0 |
| Held for the grandchildren | $105,600,000 |
Federal estate tax kept by the family in this example, at the first taxed generation alone. On our published schedule this trust costs from $52,000: the $40,000 minimum plus $12,000 for the $7.5 million funded above the included $7.5 million, at $1,500 per $1 million or part.
What a dynasty trust costs in Arizona
We publish our fees. A dynasty trust is priced on the firm's Advanced Planning and Lifetime Wealth Transfer schedule, which you can read before you call.
A standalone dynasty trust starts at $40,000, fixed in a written engagement letter before work begins. That covers design, drafting, signing, funding of the first $7.5 million and the reporting memorandum for your gift tax return. Each additional $1 million or part adds $1,500, computed fees round up to the nearest $500, and fundings above $50 million are quoted individually.
Two things change the figure. Timing: the standard runway is 90 days, and an engagement accepted after October 15 for a December 31 gift takes a 1.5 times loading; where a day count and a calendar trigger both apply, the greater governs and they never stack. Assets: closely held interests, carried interest and pre-IPO stock take a 1.25 times loading. Appraisals and out-of-state counsel pass through at cost.
The trust usually sits on top of a core plan (a revocable trust, pour-over will and powers of attorney) priced on the core schedule. Our 2026 Arizona estate planning cost guide explains both.
| Instrument | 2026 minimum | Each added $1M |
|---|---|---|
| The dynasty trust | ||
| Standalone GST or dynasty trust | $40,000+ | $1,500 |
| Often paired with it | ||
| SLAT, one spouse | $35,000+ | $1,500 |
| ILIT, survivorship | $10,000+ | $750 |
| Installment sale to a grantor trust | $60,000+ | $2,000 |
| Family LLC or FLP, with valuation coordination | $45,000+ | $1,000 |
| Crummey administration, per year, up to four powerholders | $1,500 | None |
| Existing trusts | ||
| Decanting | $10,000+ | $1,000 |
| Nonjudicial settlement or modification | $5,000+ | $500 |
| Engagement | Computation | Minimum |
|---|---|---|
| Funded at $7.5 million | Included | $40,000 |
| Funded at $15 million | $40,000 + 8 × $1,500 | $52,000 |
| Funded at $20 million | $40,000 + 13 × $1,500 | $59,500 |
| Funded at $30 million | $40,000 + 23 × $1,500 | $74,500 |
| $20 million, accepted after October 15 | $59,500 × 1.5, rounded up | $89,500 |
Minimums from the published 2026 schedule. Computed figures round up to the nearest $500. Where this page and the schedule differ, the schedule controls.
Dynasty trust questions Arizona families ask
What is a dynasty trust in Arizona?
An irrevocable trust designed to hold wealth for your children, grandchildren and later descendants instead of ending when your children inherit. When GST exemption is allocated at funding and no beneficiary's interest is drafted into that beneficiary's estate, the trust and all of its growth are not subject to federal estate or GST tax at any beneficiary's death. Arizona lets a trust interest wait up to 500 years to vest under A.R.S. § 14-2901(A)(2).
How long can a dynasty trust last in Arizona?
The statute allows 500 years, and a separate provision, § 14-2901(A)(3), permits trusts with no fixed end when its conditions are met. A 2018 Arizona Attorney General opinion, I18-006, questioned both provisions under the Arizona Constitution. It does not bind the courts, but we draft a savings clause and a protector power to change the governing law, so the trust does not depend on either provision alone.
Is a dynasty trust the same as a generation-skipping trust?
Nearly. A generation-skipping trust is any trust that can benefit grandchildren or later descendants, which brings it within the GST tax. A dynasty trust is a generation-skipping trust built to last for many generations, with enough GST exemption allocated to give it an inclusion ratio of zero, so no GST tax is ever due.
How much can we put into a dynasty trust without paying tax?
In 2026, up to $15,000,000 per person and $30,000,000 for a married couple, the amount of the federal gift and GST exemptions. Gifts within the $19,000 annual exclusion, which for a gift to a trust requires Crummey withdrawal rights, use no gift exemption, but they still need GST exemption allocated to keep a multi-generational trust fully exempt. Growth inside the trust after the gift uses no exemption at all.
Can our children use the trust's assets?
Yes, within the terms you set. A family trustee can distribute for health, education, maintenance and support, and an independent trustee can hold broader discretion. The trust can also own a home a child lives in or lend on stated terms, which gives the family the use of the assets while keeping them outside each estate.
Does a dynasty trust protect an inheritance in a child's divorce?
Largely. Assets the trust holds belong to the trust, not the child, and a spendthrift clause under A.R.S. § 14-10502 keeps them from most of the child's creditors. Property a child receives by gift or inheritance is separate property under A.R.S. § 25-213, but it can lose that character if it is commingled with marital property after distribution.
How much does a dynasty trust cost in Arizona?
On our published 2026 schedule, a standalone dynasty trust starts at $40,000, including the first $7.5 million funded, plus $1,500 for each additional $1 million or part. A trust funded with $15 million starts at $52,000. Timing and hard-to-value asset loadings apply, and the fee is fixed in a written engagement letter before work begins.
Can an existing trust be turned into a dynasty trust?
Sometimes. An Arizona trustee with discretion to make distributions can decant into a new trust with dynasty terms under A.R.S. § 14-10819, provided the new trust stays within the perpetuities limits of § 14-2901 and does not adversely affect the trust's tax treatment. A nonjudicial settlement agreement or court modification may also work. The GST status of the existing trust is confirmed first, because a change to an exempt or grandfathered trust can cost it that status.
Start with a conversation.
Bring your balance sheet, any existing trusts and gift tax returns, and the names of your advisors. We will tell you whether a dynasty trust belongs in your plan, how large it should be, and what it costs, before you decide anything. The partner who drafts it is the one who would answer an IRS notice about it.
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General information about federal and Arizona law as of September 2026, not legal or tax advice for any particular person. Exemption figures are the 2026 amounts under the Internal Revenue Code as amended in 2025. Fee figures are minimums from the firm's published 2026 schedule, before loadings. Passionately Preserving Wealth is a trademark of Boland Law Group, PLLC.