Dynasty Trust Attorney in Austin, TX

Dynasty Trusts and Generation-Skipping Tax Planning in Texas

A dynasty trust is a long-term irrevocable trust for your children, grandchildren and later generations. When it is set up correctly, the assets are not subject to estate tax as they pass from one generation to the next, and they are protected from beneficiaries’ creditors and divorces along the way.

Reviewed by Turner Henington, attorney and former KPMG tax accountant, Texas Bar No. 24148206 · Updated November 2026

What the Generation-Skipping Tax Is

The federal GST tax applies to transfers that skip a generation, such as gifts or inheritances to grandchildren, or trust distributions to them (26 U.S.C. § 2601). It is charged on top of any estate or gift tax, at the top estate tax rate of 40% (26 U.S.C. § 2641). Each person has a GST exemption equal to the estate tax exemption, $15 million in 2026 (26 U.S.C. § 2631). Allocating that exemption to a trust makes the trust, and all of its future growth, permanently exempt.

How a Dynasty Trust Works

• Funding. The trust can be funded with lifetime gifts (often through a SLAT) or at death under your revocable trust or will.
• Allocating GST exemption. Exemption is allocated on a gift tax return (Form 709) or estate tax return (Form 706). Automatic allocation rules can help or hurt (26 U.S.C. § 2632), so we make the allocations deliberately.
• Benefits for each generation. The trustee can make distributions for health, education, maintenance and support, buy a home for a beneficiary to live in, or make loans, while keeping the assets out of the beneficiary’s estate.
• Protection. A spendthrift provision protects trust assets from beneficiaries’ creditors and from division in a divorce (Tex. Prop. Code § 112.035).

The Texas 300-Year Rule

Until 2021, Texas trusts were limited by the traditional rule against perpetuities, which generally ended trusts about 21 years after the death of people living when the trust was created. For trusts that become irrevocable on or after September 1, 2021, interests must vest within 300 years (Tex. Prop. Code § 112.036). One limit to know: a settlor cannot require the trustee to keep a particular piece of real estate for more than 100 years.

Planning Points

• Married couples. When a QTIP trust is used, the first spouse’s GST exemption can be lost unless the executor makes a reverse QTIP election.
• Income tax. Trusts that are not grantor trusts reach the top income tax bracket at a low level of income, so we plan distributions and investments with income tax in mind, and many dynasty trusts start as grantor trusts.
• Flexibility over many decades. We include a trust protector, limited powers of appointment and provisions that work with Texas’s decanting statute, so future trustees can adapt to changes in the law and the family.
• Trustee succession. A trust meant to last generations needs a clear plan for who will serve as trustee, including a corporate or family trust company option.

How We Help

We design dynasty trusts as standalone lifetime trusts or as the inheritance trusts inside your revocable trust, prepare the GST allocation with your CPA, and fit the trust into your overall estate tax plan.

Why Work With Us

• Tax background. Turner Henington is a former KPMG tax accountant, so we design trusts with both the estate tax and your family’s income tax in mind.
• We work with your CPA and advisor. Marital and bypass trust decisions often happen after a death, on the estate tax return, so we coordinate with the people who prepare it.
• Flat-fee quotes. After a free consultation, you get a written flat-fee quote before any work starts.
• We also handle the first death. Funding these trusts and making the elections is part of settling the estate, and we handle both the planning and the administration.

Talk to an Estate Tax Planning Attorney

Call (512) 737-8404, book a free consultation, or send us a message below.

What Our Clients Say

Dynasty Trust FAQ

How long can a Texas trust last?

For trusts that become irrevocable on or after September 1, 2021, interests must vest within 300 years under Texas Property Code § 112.036. Older trusts generally follow the prior lives-in-being-plus-21-years rule.

Can my children still use the money in a dynasty trust?

Yes. The trustee can make distributions for their health, education, maintenance and support, let them live in trust-owned homes, and make loans, while keeping the assets out of their own taxable estates.

Do I need a dynasty trust if my estate is under the exemption?

Not for tax reasons alone, but many families use long-term trusts for protection from creditors and divorce. Allocating GST exemption to those trusts costs nothing and keeps future growth exempt.

Other Estate Tax Planning Tools

• Estate tax planning in Austin: overview
• Bypass (credit shelter) trust
• Marital trust
• QTIP trust
• Reverse QTIP election
• Spousal lifetime access trust (SLAT)
• Irrevocable life insurance trust (ILIT)
• Disclaimer trust
• Grantor retained annuity trust (GRAT)
• Charitable remainder and lead trusts
• Portability: keeping a deceased spouse’s unused exemption
• Lifetime gifting in Texas

This page is general information, not tax or legal advice for your situation. Reading it does not create an attorney-client relationship.