26 Dec

A Few Words on Perpetual Trusts

Manya Deva Natan
Manya Deva Natan is a California Bar Certified attorney with the law firm of SSS Legal & Consultancy Services located in Calabasas, CA. Her practice focuses on International Estates, Trusts and Estates, Asset Protection, Trust Administration, and more. Manya received her law degree from Stanford University, as well as a Master's in International Affairs from Columbia University. She has completed extensive course-work and training in the areas of mental, physical, and emotional health, including being a published author. She is the founder of two publishing-based companies related to health and wellness and has particular interest in the legal and financial components of health and their importance in integrated health. She has appeared multiple times on Good Morning America and is regularly contacted by national media outlets for commentary.
Manya Deva Natan

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Most people struggle to plan their financial futures beyond the next decade, while those with money and foresight are likely to think well in advance about what they want to leave their children, grandchildren and even great-grandchildren. But what about planning for eternity? It seems too long to contemplate. Yet in the last several decades, states have begun competing with one another for the business of perpetual trusts, which are designed to last forever, or at least 1,000 years in the case of Wyoming. And people have been putting their millions and billions into them, eschewing traditional trusts, which typically end after 100 years.

 

Perpetual trusts allow trust creators to maintain some control after they pass, and help protect fortunes from taxes and creditors. However, people who set up these perpetual trusts in states where they’re legal could have some headaches as lawsuits brought in a state where the trusts are prohibited could mean the out-of-state assets could be counted in any settlement.

 

In other words, all of these very expensive, carefully worded, and very sophisticated documents might fail to work as designed.

 

Perpetual trusts have been around a long time and were originally used for charitable purposes. Until recently, these trusts were subject to a limit on duration based on the life span of all the people alive when it was created plus 21 years, so about 100 years or so. But this has changed. The first state to allow perpetual trusts (without a time limit) to preserve family wealth was South Dakota in 1983. Now there are several states that allow this practice.

 

In addition to creating a legacy to last forever, perpetual trusts don’t have to make distributions. In never requiring a trust to be distributed to a beneficiary, the assets are protected for future generations,” according to the original article. If these trusts are set up correctly, they can grow without taxes as they are handed down to the next generation.

 

Critics of perpetual trusts argue against them on moral grounds. They say tying up money for generations is bad public policy and could create a virtual aristocracy. They argue that legal challenges to these trusts could come from two sources: (i) creditors in a state where the trusts are not permitted who are trying to maximize their settlements and see the trusts as sources of money; and (ii) descendants who want to break the trust and get at their money now without strings attached.

 

Nine states constitutionally prohibit perpetual trusts: North Carolina, Tennessee, Arkansas, Oklahoma, Texas, Arizona, Nevada, Wyoming, and Montana; however, five of these states have legal workarounds that allow these trusts to exist with some limitations.

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