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Secrets from the Rockefellers: How They’ve Protected Their Wealth for Generations

The Rockefeller name has been a prestigious image of wealth, power and business in American history. Other names that would rival it include Walton, Ford, Mars and S.C. Johnson. And they’ve all managed to keep their billion dollar clans intact for generations.

Wealth Eroding Factors: Gift and Estate Taxes

One of the biggest wealth eroding factors can be estate and gift taxes that you will incur at the time of your death. Luckily, as of 2016, the Estate, Gift and Generation Skipping Transfer (GST) tax exemptions are $5.45 million per individual and $10.9 million for married couples. This means you can leave a minimum of $5.45 million and a maximum of $10.9 million (if married) to your heirs and pay no federal estate or gift tax.

What’s that? You’re in the clear because this won’t affect you? Well, great. But that doesn’t mean you don’t need to protect your wealth now and at the time of your death. Even fortunes worth far less than $5.45 million are still substantial sums of money.

How do you know that your assets will be distributed according to your wishes? How do you ensure that your estate will avoid the costs of probate? How do you protect your wealth from divorce, creditors and the like now and when it’s passed to your beneficiaries? How do you pass your wealth to your beneficiaries without them incurring large income taxes? These are all important factors to consider.

Protecting Your Legacy

Regardless of where you fall on the wealth-o-meter, the wealthy have three important estate planning goals:

1. Maintain satisfactory streams of income.

2. Protect their wealth from creditors forever.

3.Keep their money outside of the wealth transfer system.

Dynasty Trusts

For the ultra-wealthy (i.e. Rockefeller status) a fourth goal may be preserving their wealth for generations, far beyond their death. This is the core function of a Dynasty Trust.

Dynasty Trusts allow you to fund up to the amount of the exemption ($5.45 or $10.9 million) into the trust. These types of trusts allow the assets to be gifted to heirs who are more than one generation younger than the Grantor (creator of the trust), free of tax. This is a key function of Dynasty Trusts, because they protect your wealth against the GST tax. Leaving part of your legacy to those more than one generation younger than you is effectively “skipping” a generation in the government’s eyes. Because of this, there are special regulations that can cause you to get hit the hardest with taxes in these instances if your wealth isn’t properly protected.

Initially, the Rule of Perpetuities limited Dynasty Trusts to a maximum period of 21 years after the death of the last identifiable beneficiary living at the time the trust was created. So, if you set up a Dynasty Trust today and have a 2-year old grandchild, the trust would remain in effect until 21 years after their death. So, even with the rule in effect, this trust could easily remain in-force for 100 years. However, if done properly, Dynasty Trusts can last indefinitely. Many states have done away with the rule, allowing these trusts to essentially go on auto-pilot. The Grantor can also opt to extend the time period with verbiage in the trust that amends the rule. Either way, the value of your trust, and its appreciation, will pass to your descendants over multiple generations free from estate, gift and income taxes.

Revocable Living Trusts

A Revocable Living Trust is very ideal for the rest of us mortals who may not reach or exceed the $5.45 million exemption, but still want to protect our wealth and accomplish those three important goals.

First, “Revocable” means that you retain the right during your lifetime to amend, change, revoke or terminate the trust at your discretion. Second, “Living Trust” means that the trust is created while you’re alive, and goes into effect at the time of your death.

There are many benefits associated with a Revocable Living Trust, the first being its ability to avoid probate. Probate can get costly rather quickly, and are extra costs that exist in addition to any gift or estate taxes. If Uncle Sam can’t get you there, he can get you here. It can also become a drawn out, time consuming process. Rather than putting your loved ones through the time, stress and expense of probate, this trust can keep your estate out of probate. Also, many probate records are open to the public, so a trust ensures maximum privacy for your family. The amount of your estate and your beneficiaries are not public knowledge.

Another key element is that all your assets are coordinated according to one set of instructions – your wishes for how you want your legacy to be distributed. The inheritance also passes to your beneficiaries free from estate, gift and even federal income taxes. Assets that are owned by the trust protect both you and beneficiaries from creditors, spouses, divorce and future death taxes.

Why Does It Matter to You?

To fully appreciate the core benefit of any trust, understand this – estate and gift taxes hit every generational level. If your wealth isn’t properly protected, your legacy may only last a generation or two, simply because of tax erosion and nothing else. Whether through a Dynasty Trust or Revocable Living Trust, you can avoid these losses by keeping your wealth outside of the wealth transfer system. It also maintains substantial income for your heirs, whether it be for education, business opportunities, healthcare or general living purposes. Limiting the control of your beneficiaries means that their inheritance from the trust remains protected from a multitude of threats, including creditors and divorce, because it remains outside of their estate.

Both Dynasty and Revocable Living Trusts are excellent strategies for creating a structure around a family legacy, depending what your most important goals are along with your net worth.


There are many other areas to consider but most people ignore these. If you need help designing your plan for retirement or just a second look, we’re happy to help.

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