To Ben Franklin’s enduring axiom that "nothing can be said to be certain, except death and taxes,"  one might justifiably add the observation today that those taxes are almost certain to change as well.
It’s virtually inevitable. For example, as government spending has skyrocketed to respond to the Covid-19 pandemic, taxation of personal and business income, investments, and estates will likely increase. With political shifts, the current estate and gift exemptions may well be eliminated before the scheduled "sunset" at the end of 2025.
Relief from anticipated tax increases
With tax policy changes a real possibility in the year ahead, individuals with substantial assets should be looking to their professional advisors NOW for effective strategies to reduce their personal taxes now and in the future. These strategies will most certainly involve:
Harvesting their lifetime exemptions before the capacity is reduced and the opportunity is lost.
Establishing trusts to move assets off of their personal financial statement so they are not subject to the estate tax regime.
Adding more permanent life insurance to their portfolios to facilitate tax-deferred growth of assets and tax-free distributions to beneficiaries.
For those who desire to reduce the estate tax impact for future generations and protect the corpus of their trusts, Dynasty Trusts funded with permanent life insurance offer the opportunity to preserve the transfer tax benefits of both trusts and life insurance for their heirs in perpetuity, or close to it.
A meaningful, lasting legacy that won’t lose value
Dynasty Trusts are excellent vehicles for clients who want to leave a tax-efficient legacy that:
lasts beyond their children and their grandchildren,  and
protects the trust’s assets from the uncertainty of future estate taxation, changing markets, family discord, creditors, and ex-spouses.
Once assets are moved out of a client’s personal financial statement into a Dynasty Trust, they remain outside of the transfer tax regime almost permanently, no longer subject to a 40% to 50% estate tax rate or the Generation Skipping Tax (GST), depending on what state you’re in.
When properly funded with permanent life insurance at each generation, a Dynasty Trust can replenish its assets using the policies’ tax-free death benefit proceeds. Without a Dynasty Trust, those assets would be returned to the family’s financial balance sheet, subject to estate taxes at every subsequent transfer from one generation to the next. Over time, that can significantly reduce the assets available to future generations.
Here’s an example of how life insurance serves to leverage the grantor’s assets in a Dynasty Trust:
A couple in their early 70s has $11 million in remaining combined lifetime exemptions. They want to gift assets to their grandchildren and subsequent generations. To accomplish this while minimizing the effect of estate taxes they can . . . 
Protection, performance, and perpetual funding to preserve the legacy
In addition to passing assets down through several generations without being diminished by estate taxes, a Dynasty Trust funded with life insurance has other key benefits, including:
asset preservation during down markets and family upheavals;
protection from creditors (depending on the state), predators, and ex-spouses (in lieu of a prenuptial agreement);
financial and psychological security for beneficiaries;
investment diversification and improved risk-adjusted performance; and
the renewal of assets over multiple future generations.
Protection from external disruptions
Including permanent life insurance adds a level of surety to the wealth transfer, raising the floor of financial security for generations to come.
The experience of a successful small business owner and her family provides a helpful, real-life example. As the owner of a thriving, closely-held manufacturing firm, she had the foresight to establish a Dynasty Trust funded with permanent life insurance that designated her two grown children and, subsequently, their children, as beneficiaries.
That proved to be an excellent decision later on when she died unexpectedly in the midst of selling her business. In the months that followed, her business assets were besieged by creditors and her estate was sued by the business buyer, virtually wiping out all the assets she had built over the years.
Fortunately, all of the assets she put into the Dynasty Trust remained intact, protected from the courts and the creditors, and available to the owner’s children and their families for many years to come. While they generally support themselves on a day-to-day basis, the trust is there as a long-term backstop.
Financial and psychological security
Life insurance in a Dynasty Trust not only protects the trust assets from the effects of taxes, economic downturns, volatile markets, and creditors, it can also
preserve family harmony by assuring that the trust assets are available to multiple heirs.
For the family described above, having the assurance that there will be enough money in the trust to help with the grandchildren’s education and any unexpected expenses down the road gives family members the financial security and a sense of psychological safety that they can pay forward to future generations with the purchase of additional permanent life insurance.
In addition, making sure the original grantor clearly outlines his or her intentions and values in writing and regularly communicates with trust beneficiaries while still living can help set expectations and create peace among family members.
Portfolio diversification to improve risk-adjusted returns
The guaranteed nature of the death benefit suggests that permanent life insurance can be viewed as a separate and non-correlated asset class, typically generating better internal returns than the yield on fixed income investments.
So, instead of investing a portion of the Dynasty Trust’s assets in low yielding corporate bonds, clients may be well-served by allocating those assets to the purchase of life insurance, where there is a potential 4% or 5% return at death.
Diversifying a Dynasty Trust’s portfolio by adding permanent life insurance can also significantly reduce volatility and improve the portfolio’s risk-adjusted return, as shown in the chart below.
An asset that is replenished for the next generation
The ability of the tax-free death benefit in permanent life insurance to replenish the corpus of the Dynasty Trust for each subsequent generation means that beneficiaries can use the trust’s funds throughout their lifetimes with the assurance that multiple generations in the future can enjoy its benefits as well.
Clearly, there are many benefits to adding permanent life insurance to a Dynasty Trust. But there are caveats as well. Depending on the client’s choice of insurance products, it’s critically important to:
set proper expectations for funding levels based on the assumed crediting rate, rate caps, and/or rates of return;
be conservative about all assumptions;
make sure clients and their other advisors understand that life insurance, like other financial assets, must be properly monitored and managed; and
select a state where the rules are compatible with the desired duration of the trust.
Still, in a world where taxes – and tax increases – are one of the inescapable certainties of life, adding life insurance to a Dynasty Trust can provide significant benefits to clients and their families for many generations to come.
 Attributed to Benjamin Franklin after signing the U.S. Constitution 1787: “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” https://www.mightytaxes.com/death-taxes-quote-history/
 Each state has its own laws and regulations regarding the perpetuity period or duration of a dynasty trust.
This material is intended for informational purposes only and should not be construed as legal or tax advice. It is not intended to replace the advice of a qualified attorney, tax advisor, or financial provider.