Protecting wealth for future generations takes more than a simple will or a basic trust. For a New York family that wants to preserve assets, limit tax exposure and shield inheritances from creditors, divorce and poor financial decisions, a descendants trust is one of the most effective tools available. We design, draft and administer descendants trusts for individuals, couples and multigenerational families, and we advise trustees and beneficiaries on how those trusts operate under New York law.
What Is a Descendants Trust?
A descendants trust, sometimes called a dynasty trust, generation-skipping trust or bloodline trust, is an irrevocable trust that holds assets for the benefit of your children, grandchildren and more remote descendants. Instead of distributing inheritances outright, the trust keeps the property inside a protective legal structure, with a trustee distributing income and principal according to the terms you set.
A typical revocable living trust terminates and distributes shortly after the grantor’s death. A descendants trust is built to last for multiple generations. In New York its duration is governed by the Rule Against Perpetuities and related provisions of the Estates, Powers and Trusts Law (EPTL), which allow a trust to continue for lives in being plus 21 years or, in certain cases, for a term measured by statute.
The trust serves several purposes at once: long-term wealth preservation across generations; protection of the assets from a beneficiary’s creditors, lawsuits and divorcing spouse; tax efficiency, including minimizing estate, gift and generation-skipping transfer (GST) taxes; controlled distributions to beneficiaries who are young, financially inexperienced or vulnerable; protection of a family business or a concentrated investment position; and privacy, since trust administration generally avoids the public probate process.
Why New York Families Choose Descendants Trusts
New York imposes its own estate tax in addition to the federal estate tax, and the state’s tax has a notable “cliff”: an estate that exceeds the New York basic exclusion amount by more than 5% loses the benefit of the exclusion entirely. For a high-net-worth New York resident, planning with a descendants trust can reduce or eliminate exposure to the cliff while also addressing federal estate and GST tax.
Beyond taxes, New York families face high real estate values, wealth concentrated in family-owned enterprises, blended family dynamics, and a litigious environment in which a beneficiary’s inheritance can be exposed to claims. Keeping assets in trust rather than distributing them outright addresses each of these realities.
| Who | What the trust solves |
|---|---|
| Parents | Keeping an inheritance within the bloodline if a child later divorces |
| Business owners | Passing shares of a closely held company to children without forcing a sale |
| Grandparents | Funding education and life milestones for grandchildren |
| Families with a vulnerable beneficiary | Providing for a beneficiary who has special needs, addiction issues or financial difficulties without handing over the principal |
| High-net-worth individuals | Using the federal estate and GST tax exemptions |
| New York residents near the exclusion | Reducing exposure to the state estate tax cliff |
Key Provisions in a Well-Drafted New York Descendants Trust
Every family is different, but certain core provisions appear in most well-designed descendants trusts. Each clause has to reflect your intentions while complying with the EPTL, the Surrogate’s Court Procedure Act (SCPA) and the tax rules.
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Trustee selection and succession
Choosing the trustee, and planning for successors, is one of the most important decisions in any long-term trust. The options are an individual trustee such as a trusted family member or advisor, a corporate trustee such as a New York bank or trust company, or a co-trustee structure that combines both. We frequently add a trust protector with limited authority to remove and replace trustees, modify administrative provisions or respond to changes in tax law.
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Distribution standards
Distribution language defines when and how beneficiaries receive trust assets. Many descendants trusts use the “HEMS” standard of health, education, maintenance and support, which gives flexibility while preserving creditor protection. Others give the trustee fully discretionary authority. The right choice depends on the family and the level of protection wanted.
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Spendthrift and asset protection clauses
New York recognizes spendthrift provisions, which prevent a beneficiary from assigning his or her interest and shield trust assets from most creditor claims. We draft spendthrift language to maximize protection while remaining enforceable under EPTL § 7-1.5 and related provisions.
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Powers of appointment
A limited power of appointment lets a beneficiary redirect trust assets among descendants without causing inclusion in the beneficiary’s taxable estate. That flexibility matters over decades as family circumstances change.
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Tax-sensitive drafting
An effective descendants trust coordinates the federal estate and gift tax exemption, the GST tax exemption and the New York estate tax exclusion. We draft formula clauses, GST allocations and disclaimer provisions to maximize tax efficiency under current law while building in flexibility for future changes.
Funding the Trust
Even the best-drafted descendants trust accomplishes nothing if it is never funded. Funding means transferring ownership of specific assets into the trust through deeds, assignments, beneficiary designations and entity-level changes. The assets most often used to fund a New York descendants trust are cash and marketable securities, interests in family limited partnerships or LLCs, closely held business interests, New York real estate (investment property as well as family residences), life insurance policies (often through a related irrevocable life insurance trust), and retirement account proceeds, with careful coordination of the beneficiary designations. We work with the family’s accountants, financial advisors and insurance professionals so that each asset is transferred properly and the trust is positioned to receive future contributions and inheritances.
Tax Considerations Under New York and Federal Law
Tax planning is a central reason families establish descendants trusts. Each strategy has to be analyzed for its effect on federal estate tax, federal gift and GST tax, New York estate tax, and the income tax outcomes for you and your beneficiaries.
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Federal estate and gift tax
A lifetime gift to a descendants trust uses part of your federal gift and estate tax exemption. Properly structured, the gift removes future appreciation from your taxable estate. The exemption is $15 million per person for 2026 and, under the One Big Beautiful Bill Act of July 2025, is permanent and indexed for inflation. Timing still matters: appreciation that occurs before the gift stays in your estate, and New York adds back taxable gifts made within three years of death.
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Generation-skipping transfer tax
The GST tax applies to transfers that benefit grandchildren or more remote descendants. Allocating GST exemption to the trust when it is funded can shield decades of growth from this extra layer of tax, which is the main reason these trusts are also called dynasty trusts. Our generation-skipping trust page covers the allocation in more detail.
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New York estate tax
New York’s estate tax structure makes pre-death planning especially important. Strategic gifts to a descendants trust, combined with disclaimer planning and credit shelter strategies between spouses, can help a family avoid losing the New York exclusion and reduce overall state estate tax.
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Income tax of the trust
A descendants trust may be drafted as a grantor trust (taxed to the settlor during life) or a non-grantor trust (taxed to the trust or its beneficiaries). Each has advantages depending on your goals. A non-grantor trust can also raise New York source-income questions, particularly where the trust has New York trustees or assets.
Administering a Descendants Trust in New York
Trusteeship is a serious fiduciary undertaking. The trustee of a New York descendants trust must comply with the Prudent Investor Act, the accounting requirements of the SCPA, and the duties of loyalty and impartiality between current and remainder beneficiaries. In practice that means funding and titling the trust assets, developing an investment policy consistent with the Prudent Investor Act, preparing fiduciary income tax returns and beneficiary K-1s, making and documenting discretionary distribution decisions, rendering annual or periodic accountings (informal or judicial), communicating with beneficiaries to satisfy the duty of disclosure, and coordinating with custodians, accountants and investment advisors.
We represent trustees in all of this. We also represent beneficiaries who have questions about their rights, who need to compel a trustee accounting, or who believe a trustee has breached fiduciary duties.
Modifying or Decanting an Existing Trust
Circumstances change. A descendants trust drafted years ago may no longer reflect current tax law, family relationships or administrative best practice. New York offers several ways to update an irrevocable trust without sacrificing its protective purpose.
| Pathway | How it works |
|---|---|
| Decanting under EPTL § 10-6.6 | The trustee distributes the trust assets to a new trust with updated terms |
| Non-judicial settlement agreement | The interested parties agree to the change without a court proceeding |
| Judicial modification or reformation | The Surrogate’s Court approves the modification |
| Trust protector action | Available where the original instrument grants the protector that authority |
We evaluate the available pathways and recommend the one that best balances flexibility, cost, tax neutrality and family harmony.
Coordinating the Trust With Your Broader Estate Plan
A descendants trust does not stand alone. It has to be integrated with your will, revocable living trust, powers of attorney, health care proxy, beneficiary designations, business succession plan and any charitable giving vehicles, so that each document works with the others and the trust actually receives the assets you intend.
For business owners, we coordinate buy-sell agreements, voting structures and succession provisions so that the family enterprise passes to the next generation without a forced sale or a liquidity crisis. For families with charitable goals, we integrate the descendants trust with charitable lead trusts, charitable remainder trusts and private foundations.
Frequently Asked Questions
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How long can a descendants trust last in New York?
Under the New York Rule Against Perpetuities, a trust generally may last for lives in being at its creation plus 21 years. Properly structured, that carries the trust across multiple generations.
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Can I serve as trustee of my own descendants trust?
If the trust is irrevocable and meant to remove assets from your taxable estate, you generally should not serve as sole trustee, because doing so can cause estate inclusion. An independent trustee or a co-trustee structure is commonly used to preserve the tax benefits.
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Will my children still benefit if the assets stay in trust?
Yes. Your children and other beneficiaries can receive distributions for health, education, maintenance, support and any other purposes you define. Many beneficiaries find that holding assets in trust gives them more protection and flexibility than outright ownership.
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Can a descendants trust be changed after it is signed?
Although irrevocable, the trust can often be updated through decanting, trust protector action, non-judicial settlement or court-approved modification. We build that flexibility into the trust wherever possible.
Talk to Us About a Descendants Trust
The first step is a confidential conversation about your goals, family circumstances, assets and existing estate plan. Whether you are setting up a trust, serving as its trustee, or a beneficiary who wants to understand your rights, call us at 212-233-1233 or email [email protected].
