'''Dynasty Trusts: How the
Wealthy Shield Trillions from
Taxation Onshore'''
An IPS Inequality Briefing Paper
Key Take Away Points
• A dynasty trust is a form of trust that is designed to sequester wealth for longer than
ordinary trusts — sometimes for centuries or forever. They are often formed in U.S.
states that have suspended or altered their state “rule against perpetuities,”
legislation that previously limited the lifespan of a trust.
• The wealth defense industry deploys dynasty trusts to enable ultra-high net worth
individuals — those with $30 million or more — to systematically avoid wealth
transfer taxes – that is, estate, gift, and generation-skipping taxes.
• Because the super-wealthy are avoiding or reducing their taxes, they are shifting the
obligations to pay for society’s investments onto lower and middle-income
households. Dynasty trusts also entrench existing levels of wealth inequality and
facilitate the formation of dynastic concentrations of hereditary wealth and power.
• Lawmakers should act at the federal level to shut down or discourage the formation
of dynasty trusts for the purposes of tax avoidance and dynastic succession. Actions
could include the passage of a federal “rule against perpetuities,” banning certain
trust arrangements, and taxing income and wealth in trusts.
Introduction
Dynasty trusts are used routinely in estate planning by millions of Americans of modest
wealth. But they also serve as a vital tool in the systematic tax avoidance of trillions of
private wealth, helping to entrench inequality and bolster the development of multi-
generational wealth dynasties.
In a healthy democratic society, with an effective and progressive tax system, great
fortunes dissipate over a few generations. Significant wealth may accumulate, but it
disperses down the family line as more heirs come on the scene. If a wealthy family pays its
fair share of annual income taxes and estate or inheritance taxes, as well as takes
advantage of tax incentives for charitable giving, these fortunes do not accelerate but
diminish. The natural order in such societies is to prevent dynastic wealth formations.
In the U.S., however, we are witnessing a massive reassertion of dynastic wealth.
One can assume, though it is difficult to trace in every case, that some families have
arrested this process of wealth dispersal through aggressive tax avoidance.
American tax law currently encourages the perpetuation and accumulation of trust-held
wealth, where assets are out of reach of taxation and family wealth can privately grow,
aided by laws promising opacity and secrecy. The United States — besting Switzerland —
is now the world’s Number 2 secrecy jurisdiction according to the Tax Justice Network’s
Financial Secrecy Index, which ranks tax havens.1 The honor is thanks to a patchwork of
U.S. states competing in recent decades to lower their standards to attract the investment
4
capital of the world’s ultra high-net worth individuals — those with more than $30 million.
Only the Cayman Islands shelters more wealth than the U.S.
The sheer size of what social scientist Jeffrey Winters calls the “Wealth Defense Industry”
— the tax attorneys, accountants, wealth managers, and family offices deployed to help the
richest 0.1 percent — reflects a staggering amount of professional fire power devoted to
making the wealthiest people on the planet appear to own considerably less wealth than
they do.2
https://inequality.org/wp-content/uploads/2021/06/Dynasty-Trusts-Brief-June15-2021.pdf
Who is the richest man in the world?
Elon Musk?
>>20504505 (pb)