Wellington R. Burt, who died back in 1919, was apparently not very fond of his family. The multimillionaire did not want his fortune to pass either to his children or grandchildren. He locked the money into a trust, providing minimal allowances to immediate family Members during their lifetimes and barring distribution of the trust corpus until twenty-one years after the death of his last remaining then-living grandchild.
His last grandchild died in 1989, and in 2010, proceedings were started to identify Wellington’s now-living descendants and distribute his fortune – now totaling about $100 million. Twelve descendants were identified each of them came into a multi-million dollar inheritance.
The facts of this case may seem oddly familiar to most law school graduates. Burt designed his trust to terminate within “the Rule Against Perpetuities,” which requires final distributions within a life in being plus 21 years. Today, many states have abolished the Rule Against Perpetuities altogether while other jurisdictions have substantially lengthened the term to hundreds of years.
In addition to keeping large estates out of the hands of undeserving family Members, trusts can serve a multitude of functions. They can be used to shield assets from creditors, they can protect a beneficiary’s inheritance from a divorcing spouse, and they can be structured to minimize estate taxes through the judicious use of GST exemption. And absent the traditional Rule Against Perpetuities, they have the potential to do so indefinitely.
What do you think – should trusts be allowed to tie up assets and protect them from creditors and taxation forever? Or should there be a reasonable period, long after the death of the original owner, after which the trust must end?
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
6050 Santo Rd Ste 240
San Diego, CA 92124
(800) 846-1555
www.aaepa.com
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