Perpetual Trust

A trust that continues forever, in perpetuity, is called a perpetual trust. Other names are also sometimes used such as “dynasty trust”, “GST trust”, “generation skipping trust”, etc. However, the GST or generation skipping trust really refer to trust that consider planning for the generation skipping transfer tax and are not necessarily perpetual, although many if not most are. If you are going to establish a perpetual trust you need to do so in a state or country (jurisdiction) that has abolished an old common law legal doctrine, “the rule against perpetuities”. This doctrine provides that interests in property must end after some defined period. Many states, such as Delaware, Alaska, South Dakota and others have abolished the rule against perpetuities so you can set up perpetual trusts. The concept of a perpetual trust is a powerful planning tool as it can be used to insulate assets from estate taxes forever (up to the GST exemption which in 2007 is $2 million, plus growth), protect assets from lawsuits against future heirs and the divorce of future heirs. Many sophisticated estate plans use perpetual trusts as their foundation.