Mark Dayton reportedly has a fair chunk of his fortune tied up in a “dynasty” trust in South Dakota.
Because SoDak is one of 23 states that allow these trusts.
Dynasty trusts push that generation-skipping tax exemption to the max, putting the exempted amount [$5 million for an individual, $10 million for a married couple, which can be stretched further using discounts, life insurance policies and other big-dollar tax-lawyer dodges – Ed.] beyond the reach of estate taxes for the life of the trust. That, in turn, means the heirs don’t have to “spend” their own exemptions on those assets. These trusts are now allowed in 23 states and the District of Columbia (see table), to the delight of companies that charge fees to manage them. Taxpayers don’t have to live in a state to put a trust there.
Mark Dayton – and the other very rich, who get to shelter their fortunes using these trusts, unlike “the rich” that Dayton proposes to extract an almost 11-percent state income tax – may be losing some of this advantage, though, thanks to – the Obama Adminsitration:
To enable these trusts, most of the states allowing them had to get rid of an old common-law principle called the “rule against perpetuities,” which allowed trusts to exist only for about 90 years. The Obama administration proposal would reinstate this old principle in a way by removing the federal tax exemption after 90 years. So the trust can go on indefinitely, but the exemption can’t. (The pass applies to taxes on wealth transfers, of course; annual income taxes are always due.)
So will Mark Dayton be happy to pay for a better USA?
(Via Joe Doakes and Tax Prof Blog)