On the November 27, 1095, Pope Urban II gave an impassioned speech at the Council of Clermont in central France, calling for Christian warriors to take up arms in a Holy War against the invading Seljuk Turks.
This was the start of the First Crusade. And over the next few centuries, several more would follow.
Soldiers from across Europe joined up and traveled great distances to fight in the Holy Land; quite often they were away from home for years at a time.
Eventually these fighters— and particularly the land-owning nobles— realized that they needed to arrange their business and personal affairs appropriately before leaving for war.
They wrote wills, they appointed property managers. And in some cases they actually transferred ownership of their estate to someone they trusted— someone who would have the full authority to act as lord of the manor in the nobleman’s absence.
Upon the knight’s return, however, it was expected that the property would be transferred back to him.
This legal precedent developed into what we know today as a Trust.
The idea behind a Trust is that a “Grantor” or “Settlor” hands over legal ownership of assets to a “Trustee”, who then manages those assets on behalf of “Beneficiaries”.
Sometimes a Trust can be revocable, whereby the Grantor can shut down the arrangement and take back the assets, just like a Medieval knight fighting in the Crusades.
Other Trusts are irrevocable, meaning they are permanent. Irrevocable trusts have substantial benefits when it comes to asset protection, which is a big reason why they are popular.
Trusts also allow you to easily pass on assets to your heirs while minimizing bureaucratic legal proceedings associated with wills and probate court. The Trust seamlessly distributes your assets according to your wishes, with all the legal work done ahead of time.
This is a common use of trusts; people will often establish a trust and transfer assets like stocks, real estate, cash, etc. Years later when they pass away, the Trustees distribute the assets to the Beneficiaries (children, grandchildren, etc.), and then the trust is would up and dissolved.
But REALLY far-sighted individuals set up something called a Dynasty Trust.
Unlike a typical trust used for estate planning, a Dynasty Trust doesn’t distribute all of its assets and dissolve once the original Grantor passes away.
A Dynasty Trust is a legacy asset that’s designed to last for generations… or even forever.
In other words, you can establish a Dynasty Trust, move assets into it, and know that your future descendants who won’t even be born for decades will benefit from your long-term thinking.
And that’s the thing about a Dynasty Trust: it forces you to think very long term.
In establishing a Dynasty Trust, you essentially have to create your own Constitution. You have to think about how you want the assets managed, how you want the money distributed, how new Trustees and managers are brought in.
Now before we go any further, let me say this is NOT just for the super wealthy who already have generational wealth.
If you’re thinking, “This sounds great, but I don’t have enough money to do this.” Well, guess what— you absolutely do! You just might not have it yet.
Never discount the time value of money. Even if you have, say, $50,000 to start with today, you could establish a Dynasty Trust that does nothing else but invest in a portfolio of assets that YOU designate.
It might take a while— 100 years or more. But eventually, decades of compounding returns will grow that $50,000 into hundreds of millions of dollars (in today’s money).
If you had an ancestor set up a Trust back in 1872 with just $2,500 (worth about $50k today) and order that the money be invested in the S&P 500, that $2,500 Trust would be worth $1.4 BILLION today.
Sure, it took 150 years, but that’s the amazing thing about a Trust: you can leave whatever instructions you want to allow your wealth to grow long after you’re gone.
You can also stipulate that, once the Trust’s assets reach a certain level, to begin making distributions to your future descendants, or charities, or anything else that you think of.
There are virtually limitless options in what you can choose to do and how you can set up the Trust’s Constitution.
You can decide that, once the assets reach $5 billion, to endow a new university or art museum named after you.
Or you can decide that future Beneficiaries must have read George Orwell’s 1984 and have a Cholesterol level below 200 before receiving any distributions.
It’s your money, so they’re your rules. You can decide whatever you want.
You can also elect that the Trust operates like an investment fund— where professional managers oversee a portfolio of business and real estate investments. You can come up with rules for how those future professional managers are selected, i.e. create your own voting laws that the Trustees and Beneficiaries have to follow.
You could also have the Trust run like a family office, which owns controlling stakes in private companies.
Your future descendents could then have the opportunity to join those companies and work their way up to senior leadership positions, growing the businesses and creating even more value for the Trust.
The possibilities are really endless. And, again, you don’t even need to be wealthy to do this. You just have to be able to think very long-term.
If you want to learn more about how Trusts can help you leave a legacy for your family, protect your assets, and make it easier to pass on your wealth without death taxes, join Sovereign Confidential today.
(If you’re already a member of Sovereign Confidential, you can read more about Dynasty Trusts here.)
