Introduction
A Dynasty Trust is a powerful estate-planning tool that can protect wealth for multiple generations often 100 years or more. But in California, unlike states like Nevada or South Dakota, dynasty trusts face legal limitations, high taxation, and regulatory complexity.
In this 2025 guide, we’ll break down how dynasty trusts work, what’s allowed under California law, and whether CA is the right jurisdiction for building generational wealth.
Tax Code & Legal References
- IRC §2611 -§2613 – Generation-Skipping Transfer (GST) tax
- IRC §643(a) – Trust income definitions
- California Probate Code §15200 -§15414 – Trust law and modification
- Cal. R&TC §17731 – Income taxation of trusts
- Uniform Statutory Rule Against Perpetuities (USRAP) – 90-year limit in CA
What Is a Dynasty Trust?
A Dynasty Trust allows assets to remain in trust for successive generations without triggering estate taxes at each generational level. It often avoids probate, estate tax, and provides asset protection if done right.
In California, however, the USRAP imposes a 90-year limitation on most trusts, capping their lifespan unless moved or restructured through a decanting or modification process.
Example: Tech Founder in San Francisco
Example: Raj, a tech entrepreneur in San Francisco, sets up a California dynasty trust with:
- $5 million in startup equity
- IP rights and future royalties
- Intention to pass assets to grandchildren tax-efficiently
Obstacles he faces:
- California’s 90-year perpetuity cap
- State income tax on retained trust earnings
- High scrutiny on valuation of startup equity
He later relocates trust administration to Nevada to benefit from no perpetuity cap and no state income tax on the trust.
Step-by-Step: Setting Up a Dynasty Trust in California (or Beyond)
- Determine Duration & Jurisdiction
If long-term planning is key, consider moving to a jurisdiction like NV or SD. - Draft Irrevocable Trust Agreement
Include GST tax planning clauses and trustee flexibility. - Appoint Independent Trustee or Corporate Fiduciary
This strengthens asset protection and limits grantor control. - File IRS Form 706-GS(T) if GST Applies
For transfers subject to generation-skipping transfer tax. - File IRS Form 1041 & Pay CA Tax on Income
If trust is administered in CA, FTB requires tax filings.
Conclusion
In 2025, California dynasty trusts face timeline restrictions, trust taxation, and limited flexibility. While possible, many high-net-worth families choose out-of-state jurisdictions like Nevada to unlock the full potential of perpetual trusts.
If your legacy spans generations, consider your jurisdiction as carefully as your beneficiaries.
Call to Action
Building generational wealth through a dynasty trust?
Schedule a legacy planning consultation with Anshul Goyal, CPA, EA, FCA
Anshul can help you:
- Evaluate whether California or Nevada fits your goals
- Minimize GST and CA income tax exposure
- Ensure your trust complies with USRAP and IRS rules
Start building your 100-year legacy today:
https://calendly.com/anshulcpa/
Anshul Goyal, CPA, EA, FCA
Anshul brings 15+ years of U.S. and international tax experience. He specializes in helping online sellers, foreign founders, and U.S. residents with IRS and multi-state compliance. Known for his deep knowledge in Shopify and Amazon seller tax strategy, Anshul has helped hundreds of entrepreneurs minimize taxes and scale legally.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified tax professional regarding your individual tax situation.
Top 5 High-Searched FAQs (2025)
1. Can I create a dynasty trust in California?
Yes, but it will expire after 90 years unless migrated to a state without such a cap.
2. Does California tax dynasty trusts?
Yes, income retained in a California-administered trust is subject to state income tax.
3. What’s the benefit of moving the trust to Nevada?
Nevada offers no income tax and no perpetuity rule.
4. Are dynasty trusts subject to estate or GST tax?
Yes, unless properly structured with GST exemptions.
5. How do I file taxes for a dynasty trust?
File IRS Form 1041, and if applicable, CA fiduciary return and Form 706-GS(T).