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Friday, September 28, 2012

Letters on Perpetual Trusts

'waggoner' Johnson_calvinLawrence W. Waggoner (Lewis M. Simes Professor of Law Emeritus, University of Michigan Law School) and Calvin H. Johnson (Andrews & Kurth Centennial Professor, The University of Texas at Austin School of Law) recently published their article entitled 'Perpetual Trusts: The Walking Dead' and 'Congress Should Effectively Curb GST Exemption for Perpetual Trusts,' Tax Notes, Vol. 136, No. 10 (2012).  The abstract available on SSRN is below: 

In separate but complementary letters to the editor of Tax Notes, Calvin Johnson (University of Texas School of Law) and Lawrence Waggoner (University of Michigan Law School) respond to an article by Dennis Belcher and seven other practicing attorneys that defend the GST exemption for perpetual trusts. In Federal Tax Rules Should Not Be Used to Limit Trust Duration, 136 Tax Notes 832 (Aug 13, 2012), the attorneys argue that the duration of a trust is a state law issue. Their article is actually a response to a Shelf Project article: Lawrence W. Waggoner, Effectively Curbing the GST Exemption for Perpetual Trusts, 135 Tax Notes 1267 (June 4, 2012), Doc 2012-9442, 2012 TNT 110-14, available electronically at http://ssrn.com/abstract=2083804.

In Perpetual Trusts: The Walking Dead, 136 Tax Notes 1215 (Sept. 3, 2012), Johnson argues that the harm to the national wealth done by perpetual trusts is a federal responsibility. Trusts reduce the value of wealth, and settlors could figure that out if they were not seduced by the tax exemption. Specific settlor instructions get out of date and become an impediment after a generation. Delegating to trustees accountable to no one means trusts are managed primarily for the benefit of the trustees. Perpetual trusts become monsters, the walking dead. The federal exemption is motivating the harm; federal law is responsible for the harm that perpetual trusts cause.


In Congress Should Effectively Curb the GST Exemption for Perpetual Trusts, 136 Tax Notes 1216 (Sept. 3, 2012), Waggoner reaffirms his Shelf Project proposal and his criticism of the Treasury Department’s proposal for dealing with perpetual trusts. The Treasury Department’s proposal would leave many trusts and much wealth GST exempt for much longer than Congress originally intended. The Waggoner proposal, if enacted, would be much more effective. Belcher and the other attorneys argue that Congress should do nothing (a position refuted by Johnson), but if Congress is to do something, the attorneys essentially embrace the Treasury proposal.

http://lawprofessors.typepad.com/trusts_estates_prof/2012/09/letters-on-perpetual-trusts-.html

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