National Conference of Commissioners on Uniform State Laws

211 E. Ontario St., Suite 1300, Chicago, IL 60611
tel 312-915-0195, fax 312-915-0187

For Immediate Release

UNIFORM STATUTORY RULE AGAINST PERPETUITIES IS LAW IN 26 STATES
Move of a Few States to Abolish the Rule In Order to
Facilitate Perpetual (Dynasty) Trusts is Ill-Advised

January 2000 - The Uniform Statutory Rule Against Perpetuities (USRAP), promulgated by the Uniform Law Commissioners (ULC) in 1986 and amended in 1990, has become the most widely-adopted perpetuity-reform measure in the country. The Uniform Rule fine-tunes the rule against perpetuities so that it reaches only its real target: placing an outer time limit on long-term or perpetual trusts while validating reasonable trusts. Uniformity in this area is especially desirable given the high degree of mobility in American society.

The federal generation-skipping transfer tax (GST tax), with its unusually stiff rates, has recently spurred a fledgling movement to abolish the Rule Against Perpetuities. The GST tax imposes high costs for creating trusts that persist through more than one generation, which would seem to discourage long-term trusts. But the GST tax also contains a $1 million per donor GST exemption that relies only on state perpetuity law to control the length of GST-exempt trusts. (In the Taxpayer Relief Act of 1997, Congress added a provision adjusting the $1 million amount for inflation.)

A few states have moved to abolish the Rule in order to facilitate the creation of GST-exempt trusts that last perpetually (or as long as the settlor has living descendants). This movement is ill-advised, says Lawrence W. Waggoner, Director of Research of the Joint Editorial Board for the Uniform Probate Code, because Congress is not likely to allow this loophole to continue indefinitely. In addition, he says, the creation of such trusts is problematic. Over time, the administration of such trusts is likely to become unwieldy and very costly.

Government statistics indicate that the average married couple has 2.1 children. Under this assumption, the average settlor will have more than 100 descendants (who are beneficiaries of the trust) 150 years after the trust is created, around 2,500 beneficiaries 250 years after the trust is created, and 45,000 beneficiaries 350 years after the trust is created. Five hundred years after the trust is created, the number of living beneficiaries could rise to an astounding 3.4 million.

The merits of USRAP are that it is simple to administer; extends the benefits of a perpetuity savings clause to trust clients whose lawyers neglected to put one in; requires no new learning of the bar; and nearly eliminates perpetuity litigation.

The ULC, officially known as the National Conference of Commissioners on Uniform State Laws, is now in its 109th year. The organization comprises more than 300 lawyers, judges, and law professors, appointed by the states as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, to draft proposals for uniform and model laws and work toward their enactment in their legislatures. Since its inception in 1892, the group has promulgated more than 200 acts, among them such bulwarks of state statutory law as the Uniform Commercial Code, the Uniform Probate Code, and the Uniform Partnership Act.

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