Florida Dynasty Trust

A Florida dynasty trust is an irrevocable trust designed to hold family wealth across multiple generations while shielding that wealth from the creditors of each successive beneficiary. Dynasty trusts combine the creditor protection available under Florida’s spendthrift and discretionary distribution statutes with estate tax and generation-skipping transfer tax avoidance, allowing family assets to compound free of both taxation and creditor exposure for up to 1,000 years.

How a Dynasty Trust Works

The grantor creates an irrevocable trust and transfers assets into it during their lifetime or at death. The trust names the grantor’s children as initial beneficiaries and provides that when each child dies, that child’s share continues in trust for the child’s own descendants. This cascading structure repeats across generations rather than distributing assets outright to each new generation.

A trustee manages the trust assets and makes distributions to beneficiaries according to the trust’s terms. The trustee is typically a corporate fiduciary or trusted family advisor capable of administering the trust over decades. Many dynasty trusts also appoint a trust protector with authority to modify trust terms, remove and replace trustees, and adapt the trust to future changes in law.

Because the assets remain inside the trust rather than passing outright to each beneficiary, the trust’s creditor protection and tax benefits continue uninterrupted. Each generation benefits from the trust without owning the trust assets personally. The distinction between benefiting from trust assets and owning them is the foundation of the dynasty trust’s protective structure.

Creditor Protection Across Generations

Dynasty trust creditor protection relies on the same Florida statutes that protect any properly structured irrevocable trust. The dynasty trust’s multigenerational duration amplifies these protections by keeping assets inside the trust indefinitely rather than distributing them outright where creditors can reach them.

Spendthrift Protection

Florida Statutes § 736.0502 provides that a valid spendthrift provision prevents a beneficiary’s creditors from attaching the beneficiary’s interest in the trust. A creditor cannot force a beneficiary to assign their trust interest, and a creditor cannot levy on distributions before the trustee releases them. Every properly drafted dynasty trust includes a spendthrift clause.

Discretionary Distribution Protection

Florida Statutes § 736.0504(2) provides that when a trustee has discretion over distributions, a beneficiary’s creditors cannot compel the trustee to distribute income or principal. This protection applies whether or not the beneficiary also serves as trustee or co-trustee. In a dynasty trust, discretionary distribution authority is standard because the trust must accommodate the varying needs of beneficiaries across multiple generations.

Protection After Distribution

Once the trustee distributes assets from the trust to a beneficiary, the distributed funds become the beneficiary’s personal property and are exposed to that beneficiary’s creditors. This is why dynasty trusts retain assets inside the trust structure rather than making outright distributions. When a beneficiary needs a home, the trustee can purchase the property in the trust’s name. When a beneficiary needs income, the trustee can make periodic discretionary distributions rather than distributing the entire trust share.

The distinction between assets held in trust and assets distributed to a beneficiary is the single most important concept in dynasty trust asset protection. Every dollar that remains inside the trust retains its creditor protection. Every dollar distributed loses that protection.

The Self-Settled Trust Limitation

Florida Statutes § 736.0505(1)(b) provides that a trust is self-settled to the extent the grantor is also a beneficiary. A grantor who creates a dynasty trust and names themselves as a current beneficiary exposes the trust assets to their own creditors regardless of any spendthrift or discretionary provisions.

Dynasty trusts intended to provide asset protection for the grantor’s descendants should not include the grantor as a beneficiary. The grantor funds the trust and establishes its terms but does not retain a beneficial interest. If the grantor needs access to trust assets during their lifetime, different planning tools—such as a spousal limited access trust where the grantor’s spouse is the initial beneficiary—can address that need without creating a self-settled trust problem.

Estate Tax and Generation-Skipping Transfer Tax

The federal estate tax applies to individual estates exceeding approximately $13.99 million (2025 exemption, adjusted annually for inflation). The generation-skipping transfer tax applies when wealth passes to beneficiaries two or more generations below the transferor, such as grandchildren. Both taxes impose rates up to 40% on amounts exceeding the applicable exemptions. Florida imposes no state-level estate tax.

A dynasty trust avoids repeated estate taxation because the trust assets are not included in any beneficiary’s taxable estate. When a beneficiary dies, the trust continues for the next generation rather than passing through the deceased beneficiary’s estate. The assets never become part of a beneficiary’s personal estate, so they are never subject to estate tax at any generational transfer.

The grantor allocates their GST exemption to the dynasty trust at funding. Once the exemption covers the initial transfer, all future appreciation inside the trust is permanently exempt from generation-skipping transfer tax. A dynasty trust funded with $13.99 million that grows to $100 million over several decades passes that entire amount to future generations free of both estate tax and GST tax.

The tax benefit and the asset protection benefit reinforce each other. Assets remain inside the trust to avoid estate taxation, and assets inside the trust are simultaneously protected from each beneficiary’s creditors. The structure that achieves one goal automatically achieves the other.

Florida’s 1,000-Year Duration

Florida Statutes § 689.225(2)(f) permits trusts created after December 31, 2000, to last up to 1,000 years. This statutory provision effectively abolished the traditional rule against perpetuities for dynasty trusts governed by Florida law.

A 1,000-year duration places Florida among the most favorable jurisdictions for dynasty trusts. Some states still limit trust duration to 90 years or apply the traditional rule against perpetuities. Others permit perpetual trusts with no fixed endpoint. Florida’s 1,000-year limit is functionally equivalent to perpetual duration for practical planning purposes.

The trust agreement must specify Florida as the governing jurisdiction and designate Florida law as controlling. The trust’s situs, the location of its trustees, and the location of its assets all factor into whether a court will honor the Florida choice-of-law provision.

Dynasty Trust Example

A married couple with a combined estate of $28 million creates two dynasty trusts, each funded with approximately $13.99 million using their respective GST exemptions. The wife’s trust names the husband as a beneficiary during his lifetime, with the couple’s children as successor beneficiaries and their descendants as contingent beneficiaries for future generations. The husband’s trust mirrors this structure with the wife as initial beneficiary.

Each trust includes spendthrift provisions, discretionary distribution authority, and a trust protector with power to decant, modify administrative provisions, and add or remove permissible beneficiaries. The trustee purchases a family vacation property in the trust’s name, manages an investment portfolio, and makes discretionary distributions to beneficiaries as needed.

When the children’s generation passes, each child’s share continues in a separate sub-trust for that child’s descendants. The trust assets have appreciated substantially, but no estate tax applies because the assets were never part of any beneficiary’s personal estate. The grandchildren benefit from the trust under the same spendthrift and discretionary protections that shielded the children’s generation.

Trust Protectors and Long-Term Flexibility

A dynasty trust that lasts for centuries must adapt to changes in tax law, trust law, family circumstances, and economic conditions that the grantor cannot predict. Trust protectors provide this flexibility without requiring court involvement.

A trust protector typically holds authority to modify administrative and distribution provisions, change the trust’s situs and governing law, remove and appoint trustees, and exercise decanting powers to pour trust assets into a new trust with updated terms. The trust protector does not hold a beneficial interest in the trust, which preserves the trust’s creditor protection and tax status.

Decanting is particularly important for dynasty trusts. Florida Statutes § 736.04117 authorizes a trustee with discretionary distribution authority to distribute trust assets into a new trust with different terms. If future legislation weakens Florida’s creditor protection statutes or changes its tax treatment, the trustee or trust protector can decant the dynasty trust into a trust governed by a more favorable jurisdiction’s law.

Dynasty Trust vs. Outright Inheritance

Outright inheritance exposes assets to every risk the beneficiary faces. A child who inherits $5 million outright and is later sued in a negligence action, divorces a spouse, or files for bankruptcy may lose some or all of the inherited assets. Inherited assets held in a beneficiary’s personal name receive no creditor protection under Florida law.

The same $5 million held inside a dynasty trust sub-trust for that child’s benefit remains protected from the child’s creditors. The child can benefit from the trust assets without owning them. If the child is sued, the trust assets are not part of the child’s personal estate and cannot be reached by the judgment creditor.

The trade-off is control. A beneficiary who receives an outright inheritance has unrestricted access. A dynasty trust beneficiary depends on the trustee’s discretion for distributions. Most families conclude that the creditor protection and tax benefits of the dynasty trust structure outweigh the loss of direct control, particularly when the trustee is a family member or trusted advisor who understands the beneficiary’s needs.

Funding a Dynasty Trust

Dynasty trusts can hold virtually any asset class. Common funding assets include publicly traded securities, interests in family limited liability companies, real estate, closely held business interests, and life insurance policies. Assets with high appreciation potential are ideal for dynasty trust funding because all future growth inside the trust is exempt from estate and GST tax.

Life insurance is a particularly efficient dynasty trust funding mechanism. The grantor creates an irrevocable life insurance trust structured as a dynasty trust, and the trust purchases a life insurance policy on the grantor’s life. The death benefit passes into the dynasty trust free of income tax, estate tax, and GST tax, providing a large initial corpus that compounds across generations. Dynasty trusts are one of several trust-based asset protection structures available to Florida residents, distinguished by their multigenerational duration and tax efficiency.