One of the most effective tools to accomplish the goal of preserving family wealth is a perpetual dynasty trust. Such a trust permits discretionary distributions of income and principal for as many generations (in terms of years) as the state's law allows. Alaska, Arizona, Delaware, Idaho, Illinois, Maryland, Ohio, South Dakota and Wisconsin have abolished, or provided trust settlors with the ability to opt out of their respective Rules Against Perpetuities. This means that a trust established in one of these jurisdictions could last forever. The essence of such a trust is that, if properly drafted and funded, to be exempt from the federal generation skipping transfer tax, it will avoid transfer taxes after creation of the trust until the last beneficiary dies. Because of the transfer tax-free compounding, the trust should recognize significant wealth accumulation, doubling every ten years. This Comment is intended to introduce the practitioner to many issues to consider when determining whether a perpetual dynasty trust is a viable option for a client.
"Perpetual Dynasty Trusts: One of the Most Powerful Tools in the Estate Planner's Arsenal,"
Akron Law Review: Vol. 32:
4, Article 5.
Available at: https://ideaexchange.uakron.edu/akronlawreview/vol32/iss4/5