The dynasty trust: what it governs, and what has to be decided before it is created
A dynasty trust is a structure meant to hold family assets beyond a single generation, according to rules set in advance. It is not a safe and it is not a substitute for a will. It is a system of governance, and most of the work in creating one lies not in transferring the assets but in deciding who will apply the rules once the person who wrote them is no longer here.
"The hard question in a dynasty trust is not what you pass on, but who will decide the dispute that arises twenty years from now."
Adv. and Notary Igal Mor
The concern that came before the term
The term "dynasty trust" is new; the question it answers is very old. Ecclesiastes puts it this way:
"And I hated all my labour which I had taken under the sun, seeing that I must leave it to the man that shall be after me. And who knoweth whether he shall be a wise man or a fool? Yet shall he have rule over all my labour wherein I have laboured."
Ecclesiastes 2:18-19
This is not a question about distrusting one's children. It is a question about what happens in the third and fourth generation, when nobody who knew the original reasoning is still around and the number of interested parties has grown. A trust structure does not answer the question. It forces the answer to be given in advance.
What a trust is under Israeli law
The Trust Law defines a trust as a relationship to an asset by virtue of which a trustee is bound to hold or act in it for the benefit of a beneficiary or for another purpose. Three practical points follow from that definition:
- The asset leaves personal ownership. It is held by a trustee, not by the settlor and not by the beneficiaries.
- The trustee is bound, not permitted. He acts for the beneficiaries or for the purpose, not on his own preferences.
- A purpose can stand in place of a beneficiary. A trust need not point to a particular person.
The Law recognises three ways of creating a trust: by statute, by contract with a trustee, and by a deed of endowment.
Trust Law, 5739-1979, ss. 1 and 2. Checked September 2026.
What makes it a dynasty trust
"Dynasty" is not a statutory term. It describes a trust intended to keep operating across several generations.
What makes that possible in Israel is precisely what the Law does not contain: the Trust Law sets no maximum duration for a trust or an endowment. It has no provision limiting the lifespan of the structure. Some legal systems impose such a limit; the Israeli Trust Law has no equivalent.
The practical meaning is not that the trust will last forever by itself. It is that the lifespan of the structure is fixed by the document you write, not by statute. Which is why the decision on when the trust ends, and what becomes of the assets then, is one to take in writing rather than leave open.
Trust Law, 5739-1979. Checked September 2026: the Law contains no provision limiting the duration of a trust.
How it is created
Where the trust is created as an endowment, the Law sets three alternative routes:
- A deed signed by the settlor before a notary.
- A will of the settlor, other than an oral will.
- A payment direction under the relevant section of the Succession Law.
The difference between the first two is practical rather than technical: an endowment by deed operates during the settlor's lifetime, while an endowment by will takes effect only after death. Choosing between them changes who manages the assets in the years the settlor is still here.
For a public endowment there is also a duty to notify the registrar within three months of becoming a trustee, and a duty to report changes.
Trust Law, 5739-1979, ss. 17 and 26. Checked September 2026.
What the trust deed has to decide
This is the part people tend to postpone, and it is the part that determines whether the structure holds. Five questions that should not be left open:
Who decides
Who the trustee is, who replaces them if they cannot or will not continue, and who appoints the replacement. A trust in which the trustee's identity depends on the agreement of every beneficiary will seize up on the day there is no agreement.
On what rules distributions are made
Fixed distribution, distribution by need, or a combination. The more general the wording, the wider the trustee's discretion, and the greater the exposure to dispute.
What happens when circumstances change
Divorce, a beneficiary in difficulty, a beneficiary born after the deed was written, the sale of a central asset. These are not edge cases; they are ordinary life across three generations.
How disputes are resolved
An internal mechanism set in advance saves an application to court. Its absence guarantees one.
When it ends
The date or event on which the trust terminates, and what is done with the assets then.
What a trust does not do
Three clarifications that save disappointment:
- It is not a substitute for a will. Assets not transferred into the trust pass by succession as usual, so the two documents have to speak to each other.
- It is not immune to every claim. How the trust stands in relation to claims by creditors, by a spouse, or by someone entitled to maintenance from the estate is examined on its facts, and is not settled in advance by the mere existence of the trust.
- It does not remove the need for management. A living trust requires an active trustee, reporting, and maintenance over years. A structure nobody maintains loses its value.
Tax, briefly and carefully
The taxation of trusts is governed by its own regime in the Income Tax Ordinance, and the outcome depends on classification: who created the trust, who the beneficiaries are, and the residency status of each of them. A different classification leads to a different tax result, and sometimes to different reporting duties.
The practical conclusion is simple: classification is examined before the structure is created, not after, and with a tax adviser alongside. A structure that is sound as a matter of law but was never checked for tax can produce a liability nobody planned for.
This page carries no tax rates or figures, because they change and because the answer depends on the family's own circumstances.
Where a lawyer makes a difference
The difference between a trust that holds and a trust that comes apart lies not in the drafting but in the questions asked before the drafting. The work starts with mapping: which assets go in and which stay out, who the beneficiaries are today and who may be a beneficiary in twenty years, and what happens in each scenario of change.
Only then are the rules written, and in parallel the fit is checked between the trust and the wills, continuing powers of attorney and property agreements already in the family. Documents written at different times that do not speak to each other are the common source of dispute.
In summary
A dynasty trust is not an avoidance device and not a shortcut. It is a governance structure: it requires deciding in advance who decides, on what rules, and what happens when circumstances change. Israeli law places no limit on how long it may last, which is precisely why the decisions in the document are what determine its fate.
Creating one properly calls for alignment between the trust and the family's other documents, and for the tax position to be examined before it is set up.
Contact us to review how the structure fits your family and for information on the options open to you.
What people ask us about a dynasty trust
Is "dynasty trust" a statutory term?
How long can a trust last?
Does a trust replace a will?
How is an endowment created?
Can a trust be changed once created?
What happens when a trustee cannot continue?
What about tax?
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A short diagnostic call in which we map which assets suit the structure, who decides within it over time, and how it sits with the wills and powers of attorney already in place.