What is a dynasty trust and what problem does it solve?

A dynasty trust is a long-term irrevocable trust designed to pass wealth across multiple generations while minimizing estate, gift, and generation-skipping transfer taxes at each level. Normally, wealth can be taxed as it moves from you to your children, and again from your children to your grandchildren. A dynasty trust holds assets for descendants for as long as state law allows – in some states, effectively forever – so the assets aren't re-taxed each generation and are also shielded from beneficiaries' creditors and divorces. You fund it using your lifetime gift and GST exemptions, so it's most relevant for families with significant wealth wanting to build a lasting financial legacy. The downside is permanence and loss of control: once funded, the rules are largely locked in. It's an advanced tool, not a starter estate plan.