Unconstitutional Perpetual Trusts

54 Pages Posted: 18 Jun 2014 Last revised: 22 Nov 2014

See all articles by Steven J. Horowitz

Steven J. Horowitz

Sidley Austin LLP

Robert H. Sitkoff

Harvard University - Harvard Law School; European Corporate Governance Institute (ECGI)

Date Written: August 8, 2014

Abstract

Perpetual trusts are an established feature of today’s estate planning firmament. Yet little-noticed provisions in the constitutions of nine states, including in five states that purport to allow perpetual trusts by statute, proscribe “perpetuities.” This Article examines those provisions in light of the meaning of “perpetuity” as a legal term of art across history. We consider the constitutionality of perpetual trust statutes in states that have a constitutional ban on perpetuities and whether courts in states with such a ban may give effect to a perpetual trust settled in another state. Because text, purpose, and history all suggest that the constitutional perpetuities bans were meant to proscribe entails, whether in form or in function, and because a perpetual trust is in purpose and in function an entail, we conclude that recognition of perpetual trusts is prohibited in states with a constitutional perpetuities ban.

Keywords: perpetuities, perpetuity, entail, fee tail, jurisdictional competition, state constitution, perpetual trust, dynasty trust

JEL Classification: K11, K34

Suggested Citation

Horowitz, Steven J. and Sitkoff, Robert H., Unconstitutional Perpetual Trusts (August 8, 2014). 67 Vanderbilt Law Review, Forthcoming, Harvard Public Law Working Paper No. 14-27, Available at SSRN: https://ssrn.com/abstract=2451083

Steven J. Horowitz

Sidley Austin LLP ( email )

One First National Plaza
Chicago, IL 60603
United States

Robert H. Sitkoff (Contact Author)

Harvard University - Harvard Law School ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://https://hls.harvard.edu/faculty/directory/10813/Sitkoff

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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