An old TV show. Today, the word is also being used to describe an estate-planning technique for leaving a legacy for children and grandchildren without significant reduction for taxes. The objective of many individuals is to leave as much of their worth to their families as possible. But the tax law makes this difficult. Very generally, with a dynasty trust, you set up an irrevocable living trust arrangement and contribute cash or other assets to it.
Dynasty trusts are extremely flexible and, thus, there are several variations.
The trust then purchases a life insurance policy on the creator of the trust with some or all of the trust assets. On the creator's death, the trust receives the insurance proceeds. If everything is properly set up, the insurance proceeds avoid estate tax and generation-skipping transfer tax. The trust can be written to provide income to children, grandchildren, great-grandchildren, etc., as well as provide the trustee a limited ability to pay out trust principal to those beneficiaries. If the trust is set up to meet IRS requirements, the amount remaining in the trust won't be taxed as part of the beneficiaries' estates either, until the trust property is eventually distributed.