The Often Unexpected Consequences of The Creation of a Perpetual TrustThe Often Unexpected Consequences of The Creation of a Perpetual Trust

Many U.S. attorneys and financial planners continue to recommend that their clients create perpetual trusts, frequently referred to as “dynasty trusts.” While there are a number of reasons that might propel an individual to create such a trust, the primary motivating factor has been to avoid the federal generation-skipping transfer tax on the assets of trusts for later family generations. Spurred by this method of tax avoidance, a cottage industry in perpetual trusts has come into being. It’s reached sufficient scale that many of the states in the United States interested in competing for this trust business have eliminated their rules against perpetuities (RAPs)¹ to permit the creation of perpetual trusts within their boundaries. These ...