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"Many States Now Allow Dynasty Trusts"

Many States Now Allow Dynasty TrustsCharitable trusts can last indefinitely―like the trusts that fund the Rhodes Scholarships and Pulitzer Prizes―but it used to be that private trusts (trusts set up to benefit private beneficiaries) could be no longer than the life of a person alive at the time the trust was created, plus twenty-one years. This provision―known as the rule against perpetuities―effectively limited trusts to around 100 years.

All that is changing now. In a growing number of states, the law now permits you to set up trusts that can last hundreds of years, if not indefinitely. That may permit you to avoid estate tax on the money as it passes from generation to generation, shelter the money from creditors (in lawsuits, bankruptcy, or divorce), and benefit your descendants for many generations.

Check with your lawyer to see if such trusts are available in your state. You may also be able to establish a trust in another state that has no rule against perpetuities, even if yours does.

(Fall 2005)

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