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Basketball team owner places franchise in dynasty trust

Basketball enthusiasts in Moorestown keep track of their favorite teams, whether they have season tickets to games or whether they are watching the game in their living room with a snack and beer. Therefore, they may be interested to hear that the owner of the Utah Jazz has transferred both the basketball team and the arena where the team plays into a dynasty trust. Back in 1985, the owner and her late husband purchased the franchise. At the time, the purchase cost them $26 million.

A dynasty trust serves as a means for a family to hold onto the trust assets for many generations. In general, traditional trusts end when the creator of the trust or his or her offspring pass away. A dynasty trust, however, will continue to exist, as long as state law permits and are usually irrevocable.

In a dynasty trust, the beneficiaries to the trust usually have limited access to the funds generated by the trust, while they are alive and will not outright receive the trust assets. Instead, the trust assets continue to be held in the trust for future generations.

The first transfer in a dynasty trust is "seed money." After that, the trust only makes a few distributions for the first 10, 20, 30 years or more. This allows the trust assets to appreciate. In addition, in general, a dynasty trust is designed in a way that does not allow beneficiaries to use trust assets to pay their debts.

Many dynasty trusts are not subject to generational transfer taxes, in either full or in part. For example, this year, if a couple is married, they can take advantage of a $10.98 million exemption from generation skipping transfer taxes for their dynasty trust.

Although the terms of a person's dynasty trusts are usually kept private, per one report, in the Utah Jazz owner's dynasty trust, the owner will be the trustee and will eventually turn control of the franchise over to a six-person board, made up of her relatives. A majority or supermajority vote of the board will be needed when decisions regarding the franchise need to be made.

Dynasty trusts can be one option for those who want to see their assets protected not just for their children, but also for generations to come. They are though, complex estate planning documents. Thus, those who wish to create a dynasty trust may be well served to seek professional advice before starting, so that the final trust is legally sound.

Source: WealthManagement.com, "Utah Jazz Owners Demonstrate Power of Dynasty Trusts," Jeramie J. Fortenberry, Feb. 6, 2017

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