TAKING STOCK: Dynasty trusts

Dear Mr. Berko:

I have a large amount of money that I would like to shield from estate taxes, which could consume an inordinately large portion of my assets. It's too complicated and too personal to relate the details. Unfortunately, my wife and I do not have as good a relationship with our lawyer as we should have. A friend of ours recently mentioned a dynasty trust, which interests us. It seems simple and appears that it would do the job for us. We read that your daughter is a lawyer and hope you can prevail upon her to share her knowledge with you so you can advise us. And if you're ever in Rochester, my wife will make you the best ribs you can imagine.

-- SN, Rochester, Minn.

Dear SN:

My daughter is a criminal attorney. So if you get caught bringing in a load of cocaine from Colombia or if you commit wire fraud and abscond with a few billion from Merrill Lynch, she may be able to help you. White-shoe law isn't her bag, and she doesn't know borscht or beans about trusts, estates, wills, taxes and the like. Because you can't communicate properly with the lawyer you currently employ, she gave me the names of several highly regarded (trust/estate tax) attorneys in Rochester, which I have passed on to you. And she did give me the following high points of a dynasty trust.

On the banks of the Big Sioux River, about 253 miles east of you, in the state of South Dakota, in the county of Minnehaha, there's about 75 square miles of land currently occupied by churches, businesses, schools, parks, homes and 170,000 residents, all concentrated in a defined area called Sioux City. And located at 201 S. Phillips Ave. is the South Dakota Trust Co. (its New York office is on East 42nd Street), founded by Messrs. King and McDowell about a decade ago. Today South Dakota Trust Co. has $14 billion under administration and $75 billion under agency. It's very important to understand that no trust administration is done from the company's New York office. South Dakota Trust Co. does not manage money but works with outside investment managers or custodians of your choice. So after visiting with one of your new lawyers in Rochester, this is where you may be advised to establish a dynasty trust. It's important to know that this acquaintance pays rent on a small office, establishing a legal South Dakota address for the dynasty trust, which holds all your assets.

A dynasty trust allows wealthy families to escape estate taxes forever and is used to pass money on to multiple generations. A dynasty trust in South Dakota has no expiration date, and -- except for Idaho and Wisconsin -- every other state imposes time limitations (usually the lifetime of the living heir plus 21 years) on dynasty trusts. Meanwhile, there are no minimum distributions, and the trust's assets can grow for an unlimited number of future generations. You can establish a dynasty trust in most states; however, the South Dakota Division of Banking has fine-tuned the art of exploiting almost every federal loophole one can imagine. South Dakota provides inviolable secrecy for trusts and ironclad protection of assets from creditors and former spouses, but not from the Internal Revenue Service. These laws have encouraged more than 75 billionaires and over 200 centa-millionaires to become clients of South Dakota Trust Co. In fact, the South Dakota Division of Banking has established a set of guidelines giving families the ability to establish their own trust companies. For some folks, this eliminates the need to rely on a bank trustee and enhances the family's control over investment decisions. And most importantly, the state does not tax income derived from investments. So a trust set up in South Dakota can shield huge fortunes from estate taxes for centuries while it passes cash to great-great-great-grandchildren and beyond. "Cool beans," as my daughter would say.

Thanx for the invite. And if you're ever in Sioux City, I'm told the Rowdy Hog has some of the best barbecue vittles you can imagine.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

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Published: Mon, Mar 3, 2014