Friday, March 14, 2014
Sarah Hinchliffe (William & Mary VAP) R.I.P. Rule Against Perpetuities – Halloween in Trust Law. Where are We Now, and Where Should We Be? on SSRN. Here's the abstract:
Long has there been a debate about the validity of the Rule Against Perpetuities, and whether it is time to extinguish the Rule in the United States. I argue that, yes, and put to rest any claims against a reintroduction of the Rule in the United States. I discuss deficiencies in previous – and current – approaches that sought to abolish the RAP in the United States, and the degree that these approaches can be purposefully adapted to achieve uniformity that is consistent with the equilibrium present in trust law. This article seeks to identify the progressive shift in trust law, and cautions against it shifting too far in favor of beneficial interests. I propose that States’ adopt a uniform abolishment of the Rule Against Perpetuities, and suggest a method to achieve this. While there appears to be limited difference in the introduction of the GST tax following 1986 from a fiscal perspective, the author identifies that there exist incentives for settlors, and requisite States if the proposal identified in this article is followed. Therein, this paper outlines the need to clarify beneficial entitlements under a Dynasty Trust, which is important on two accounts: (i) prevention of trust shopping; and (ii) highlighting the importance of establishing residency requirements under tax law to avoid triggering tax avoidance rules. Part I examines the balance that trust law strikes between implementing the settlor’s donative intent and protecting the interests of trust beneficiaries in the transferred property. Part II probes claims by the ALI, and concludes that trust law should not prevent a settlor from requiring trust assets to be invested in a fashion manifestly harmful to the interests of the trust’s beneficiaries. This, it is argued, is necessary to ensure a balance be maintained in trust law in the United States.