Transfer Tax Avoidance: The Impact of Perpetuities Restrictions Before and after Generation Skipping Taxation

Abstract:     
This Article explores the impact of perpetuities restrictions prior to and after the enactment of the generation-skipping transfer tax system (“GST”). First, the Article explains how perpetual tax avoidance via Wisconsin-based trusts was possible before the enactment of generation-skipping taxation. The author gives Particular focus to the use of special powers of appointment as a means of achieving perpetual tax avoidance. Then, based on conflict of laws rules, the Article shows how citizens of any state could have selected the laws of Wisconsin to govern the validity of property dispositions. The Article goes on to demonstrate the impact of generation-skipping taxation on tax avoidance devices and shows how the generation-skipping prevents perpetual tax avoidance but prolonged avoidance via trusts is still possible. The Article concludes with recommendations for corrective action by Congress, including a proposal to eliminate prolonged tax avoidance.

Number of Pages in PDF File: 50

Keywords: transfer tax, tax avoidance, perpetual tax avoidance, tax avoidance devices, prolonged tax avoidance, perpetuities restrictions, generation-skipping transfer tax system, GST, special powers of appointment, eliminate tax avoidance

Accepted Paper Series