|
|
 |
|
| Pay It Forward |
The Lure of Dynasty Trusts
Michael Sisk
12/01/2003
|
Good intentions and flexible wording do not eliminate the risk—the likelihood, really—that somewhere down the line the trust will have to be changed or dissolved. So flexible wording should include a mechanism to amend the trust in the future, to liquidate the trust if it is in the best interests of the beneficiaries, to remove or replace a trustee, and to switch jurisdictions should, say, state tax laws change. "Does anyone seriously believe that many of these trusts will be around in 360 years or 1,000 years?" Stone asks. "The real idea is to put the assets into trust for as long as the family wants it in trust."
| "Does anyone
seriously believe that many of these trusts will be around
in 360 years or 1,000 years?" Stone asks. "The real idea is
to put the assets into trust for as long
as the family wants
it in trust." |
James Kronenberg, principal and associate fiduciary counsel at Bessemer Trust, does not see ongoing or immutable trusts as realistic. "The idea that these things can go on forever is oversold. Things change. When you get to the third and fourth generation, the amount of money gets diluted because there are more people sharing the pie, and those people are of varying circumstances and have different needs and wants. That puts enormous pressure on the trust and the trustee to satisfy the beneficiaries." A well-designed, flexible trust can help.
In fact, Florida has enshrined flexibility of design in its laws by requiring trusts be amendable. If a trust cannot be modified, Stone says, "Any beneficiary can appeal to the court, and the court has the ability to modify that trust to better serve the beneficiaries." He adds: "If you are so foolish and vain to think you can write a trust now for 1,000 years, then go to Delaware."
Many do just that—and not simply because Delaware has waived the rule against perpetuities, thereby extending the life of a dynasty trust indefinitely. Delaware’s accumulated capital gains are not subject to state taxes, and the state offers individuals a high degree of privacy. Delaware also is at the forefront of asset protection, and its laws make it difficult for creditors to pursue a trust’s beneficiaries.
|
|
|
|
|
|
|
