The Post-OBBBA Landscape: What Changed for Estate Planning
The Post-OBBBA Landscape: What Changed for Estate Planning
An important change to how families may approach estate planning came with the One Big Beautiful Bill Act (OBBBA), signed into law July 4, 2025.
Families now have a “permanent” $15 million exemption per individual — or $30 million for married couples — effective Jan. 1, 2026, with inflation indexing beginning in 2027. Note that the word “permanent” here means there are no scheduled sunsets to the law or automatic changes until Congress decides otherwise.
The law’s permanence means the urgency can ease, but moving appreciating assets out of your estate remains a potentially valuable action.
Combined with the generation-skipping transfer (GST) tax exemption and other trust strategies, a dynasty trust can help protect what you’ve built and transfer it across generations.
What Is a Dynasty Trust?
A dynasty trust is an irrevocable trust designed to hold and distribute assets across multiple generations while reducing exposure to estate, gift, and generation-skipping transfer (GST) taxes. By keeping assets in trust, the structure may help shield wealth from estate taxes, creditors, and divorce at each generational transition.
The key mechanism is the GST tax exemption.
This makes a dynasty trust fundamentally different from a standard irrevocable trust.
Not all states allow trusts to last indefinitely. The rule against perpetuities — a legal doctrine limiting how long a trust can exist — varies by state, making jurisdiction selection critical in dynasty trust planning. In states that still enforce the traditional rule, a trust must terminate after a set period that’s typically tied to the lifespans of people alive when the trust is created, plus 21 years. That translates to roughly one or two generations. For a dynasty trust designed to shelter wealth across many generations, this limitation defeats the purpose. Therefore, families may look to states that have abolished or extended the rule.
Choosing the Right Jurisdiction: South Dakota, Nevada, Delaware, and Alaska
The state where you establish your dynasty trust — its “situs” — determines the legal framework for its entire existence. The right jurisdiction depends on whether privacy, asset protection, duration, or tax efficiency matters most. A trust can be established in a state where neither the grantor nor beneficiaries reside.
Four U.S. jurisdictions have abolished or extended the rule against perpetuities and created a particularly favorable tax and legal environment for multigenerational trusts.1
South Dakota
South Dakota abolished the rule against perpetuities in 1983, allowing truly perpetual trusts. It has no state income tax on trust income and is the only state with automatic perpetual sealing of court records, making it ideal for families who prioritize privacy.2
Nevada
Nevada allows 365-year trusts with no state income tax and a short two-year statute of limitations for creditor claims, making the state strong for asset protection.3
Delaware
Delaware permits perpetual trusts for personal property, although real property held in trust is subject to a 110-year limitation. Delaware imposes no state income tax on trusts, as long as no beneficiaries reside in the state. It offers strong directed trust provisions and a well-developed body of trust case law.4
Alaska
Alaska enacted the first domestic asset protection trust legislation in 1997. It permits 1,000-year trusts with no state income, capital gains, or estate taxes, plus an opt-in community property trust.5
Funding Strategies for Your Dynasty Trust
Choosing the right funding strategy depends on the assets and the transfer method, each with distinct tax implications.
Lifetime gifts using the exemption
The most straightforward approach is a completed gift that uses part of your lifetime gift tax exemption and part of your generation-skipping transfer (GST) exemption. In 2026, you can transfer up to $15 million per individual — or $30 million per married couple — free of federal transfer taxes.
The key is allocating your GST exemption correctly on your gift tax return (IRS Form 709) at the time of the transfer. Without proper allocation, the trust may be only partially exempt from GST tax, or not exempt at all.
Choosing the right assets
The preferred funding asset has high expected appreciation. Closely held business interests, concentrated equity, and real estate held for the extended future are frequent candidates. Low-basis property requires caution because the trust receives carryover basis rather than a step-up in basis at death.
Installment sales to a grantor trust
For families seeking to move appreciating assets without using their full exemption, an installment sale to an intentionally defective grantor trust (IDGT) may be a useful strategy. You sell assets for a promissory note, freezing the value in your estate while appreciation accrues outside it. Because the trust is a grantor trust for income tax purposes, you pay the income tax on trust earnings, further reducing your taxable estate. (You’ll find more information on IDGTs in the Coordinating Dynasty Trusts With GRATs, IDGTs, and SLATs section of this guide.)
The Generation-Skipping Transfer Tax and Your Dynasty Trust
The generation-skipping transfer (GST) tax applies when you transfer assets to someone more than one generation below you, such as a grandchild. The 2026 GST exemption is $15 million per individual, matching the estate and gift tax exemption. Unlike those exemptions, it is not portable between spouses, making careful planning essential.
When you allocate your full GST exemption to a dynasty trust at funding, the trust achieves a zero inclusion ratio — meaning no GST tax applies to future distributions regardless of how much the trust assets grow. This allows a dynasty trust to shelter wealth from transfer taxes across multiple generations.
The allocation must be reported on a timely filed gift tax return. A late or missing allocation means the trust is only partially exempt.
Because unused GST tax exemption is lost at death, you may consider coordinating with a tax professional.
Coordinating Dynasty Trusts With GRATs, IDGTs, and SLATs
A dynasty trust is rarely a stand-alone tool. It’s often most effective when integrated with other trust strategies, each solving a different problem.
Grantor retained annuity trusts
A grantor retained annuity trust (GRAT) allows you to transfer asset appreciation to heirs at little or no gift tax cost. You contribute an asset and receive an annuity for a set term; when the term ends, all appreciation in excess of the IRS hurdle rate passes tax-free to beneficiaries. The distribution to beneficiaries can flow into a dynasty trust to help extend the tax benefits across generations.
Intentionally defective grantor trusts
An intentionally defective grantor trust (IDGT) is an irrevocable trust structured so that you are treated as the owner for income tax purposes but not for estate tax purposes. This lets you pay the income tax on trust earnings, further helping to reduce your taxable estate. IDGTs are often paired with installment sales to move appreciating assets outside your estate. For single individuals, an IDGT can provide the same benefits that a spousal lifetime access trust (SLAT) provides for married couples.
Spousal lifetime access trusts
A SLAT is designed for married couples. You fund an irrevocable trust for the benefit of your spouse and descendants, removing assets from your estate while still allowing your spouse to access them if needed. SLATs can freeze appreciating assets, create a creditor-protected pool, and use the full exemption per spouse. The post-One Big Beautiful Bill Act benefits of freezing appreciation and asset protection are compelling.
Integrated Strategies for Your Family’s Financial Picture
Dynasty trust planning may be most effective when integrated across financial planning, tax planning and preparation, estate planning, investment management, and insurance solutions.
Here are four integrated strategies to consider.
Strategy 1: Exemption use and generation-skipping transfer allocation
With the $15 million exemption permanence, families can model dynasty trust funding without sunset pressure. Fund a dynasty trust in a perpetuities-friendly state with appreciating assets, allocate your full generation-skipping transfer (GST) exemption, and file IRS Form 709 correctly. This coordinates estate planning, tax planning, and investment planning.
Strategy 2: Business owner liquidity and succession
For business owners approaching a sale, a dynasty trust can likely serve as the receiving vehicle after a liquidity event. An intentionally defective grantor trust (IDGT) sale can freeze the value in your estate before the sale, and the dynasty trust can hold the proceeds for generations. This coordinates estate planning, tax planning, and financial planning.
Strategy 3: Concentrated stock and GRAT-to-dynasty coordination
Executives with concentrated equity can use a grantor retained annuity trust (GRAT) to transfer appreciation at minimal gift tax cost, then direct the rest of the GRAT into a dynasty trust. Life insurance within the trust structure may provide liquidity. This coordinates investment planning, estate planning, and insurance planning.
Strategy 4: Married couple coordinated spousal lifetime access trust and dynasty trust planning
Married couples can coordinate dual spousal lifetime access trusts (SLATs) with a dynasty trust to maximize exemption use while aiming to preserve access. Each spouse funds a SLAT using the full $15 million individual exemption, and the dynasty trust serves as the multigenerational wealth transfer structure. This requires careful drafting to help avoid the reciprocal trust doctrine — a legal principle in federal estate tax law that prevents individuals from avoiding estate taxes by creating “mirror image” trusts for each other.
At Mercer Advisors we offer all the expertise you need, all in one place.
Next Steps: Putting It All Together
The One Big Beautiful Bill Act (OBBBA) gave families some certainty in estate planning. With the $15 million exemption now permanent, the pressure of a sunset deadline is gone. But the opportunity to move appreciating assets — and all their future growth — outside the transfer tax system remains as valuable as ever. A dynasty trust, funded with the right assets in the right jurisdiction, with proper generation-skipping transfer (GST) exemption allocation, is one of the most powerful tools available for multigenerational wealth transfer.
Consider that effective plans do not generally treat estate planning, tax planning, and investment planning as separate exercises. They coordinate them. A grantor retained annuity trust (GRAT) can feed appreciation into a dynasty trust. An intentionally defective grantor trust (IDGT) sale can freeze business value before a liquidity event. A spousal lifetime access trust (SLAT) can provide spousal access while funding the multigenerational structure. Each tool solves a different problem, and the dynasty trust is the connective tissue that ties them together
If you have not yet reviewed your estate plan in light of the OBBBA changes, now may be the time.
FAQs
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A dynasty trust is a multigenerational irrevocable trust designed to hold and distribute assets across multiple generations while reducing exposure to estate, gift, and generation-skipping transfer (GST) taxes. By keeping assets in trust rather than distributing them outright, the structure may help shield wealth from estate taxes, creditors, and divorce at each generational transition. The key mechanism is the GST tax exemption, which allows trust assets and future appreciation to pass to grandchildren and later generations without additional transfer tax at each level.
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The generation-skipping transfer (GST) tax exemption for 2026 is $15 million per individual, matching the federal estate and gift tax exemption. Unlike the estate and gift tax exemptions, the GST exemption is not portable between spouses, meaning each spouse must allocate their own exemption independently. When you allocate your full GST exemption to a dynasty trust at funding, the trust achieves a zero inclusion ratio and no GST tax applies to future distributions regardless of how much the assets grow.
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Even with the $15 million exemption now permanent, a dynasty trust can help move appreciating assets — and all future growth — outside your estate and the transfer tax system. The planning question after the One Big Beautiful Bill Act shifts from racing a sunset deadline to building the right architecture for your family’s goals. A dynasty trust funded with appreciating assets in a perpetuities-friendly state, combined with proper generation-skipping transfer (GST) exemption allocation, can help shelter wealth from transfer taxes across multiple generations. Note that “permanent” here means there are no scheduled sunsets to the law or automatic changes until Congress decides otherwise.
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Funding a dynasty trust with appreciating assets can be more effective than cash because the goal is to move future growth outside your estate. Closely held business interests, concentrated equity, and real estate held for the extended future are frequent candidates. Low-basis appreciated property requires caution because the trust receives carryover basis rather than a step-up at death. Cash and high-basis assets often transfer more cleanly, but the trade-off is less future appreciation outside the estate.
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Mercer Advisors offers comprehensive wealth planning that coordinates estate planning, tax planning and preparation, and investment management. You can schedule a complimentary consultation with us.
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The IRS provides updated guidance on estate and gift tax exemption amounts on its website, including the $15 million basic exclusion amount for 2026. Mercer Advisors also offers resources on our Sharing Knowledge page covering estate planning strategies after the One Big Beautiful Bill Act and how the exemption affects multigenerational wealth transfer planning.
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A dynasty trust is designed to shelter wealth from transfer taxes across multiple generations by allocating the generation-skipping transfer (GST) exemption at funding. A spousal lifetime access trust (SLAT) is designed for married couples to remove assets from the estate while preserving indirect access through the spouse. A SLAT can fund a dynasty trust, but the two structures serve different primary purposes: The dynasty trust prioritizes multigenerational tax efficiency, while the SLAT prioritizes spousal access.
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The state where you establish your dynasty trust determines its legal framework. Both South Dakota and Nevada are dynasty trust jurisdictions with no state income tax. South Dakota offers truly perpetual trust duration and is the only state with automatic perpetual sealing of court records, making it ideal for families who prioritize privacy. Nevada allows 365-year trusts and features a short two-year statute of limitations for creditor claims, making it worth considering for asset protection. The right choice depends on whether privacy, duration, or asset protection matters most to your family.
1“The Importance of Picking the Right Trust Situs.” Wealth Management, Feb. 18, 2026.
2“Location, Location, Legacy: The Top Trust Jurisdictions You Need To Know in 2026.” Wealth.com, Jan. 11, 2026.
3“Location, Location, Legacy: The Top Trust Jurisdictions You Need To Know in 2026.” Wealth.com, Jan. 11, 2026.
4“Location, Location, Legacy: The Top Trust Jurisdictions You Need To Know in 2026.” Wealth.com, Jan. 11, 2026.
5“Location, Location, Legacy: The Top Trust Jurisdictions You Need To Know in 2026.” Wealth.com, Jan. 11, 2026.
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