Unlimited Trust Duration

• South Dakota was the first unlimited duration trust state (1983) with no state income tax. Many advisors and clients struggle with the idea of creating a generation-skipping trust with an unlimited duration (i.e. Dynasty Trust) as a result of unawareness of the advantages of creating such a trust and how flexible this trust can actually be. Once the flexibility and advantages are understood, many clients frequently ask the question "Why wouldn't I have an unlimited duration Dynasty Trust?" It is not enough to ask someone whether they want an unlimited duration Dynasty Trust without explaining the advantages, because the typical reaction is that 80 to 120 years is sufficient.

• A Trust's maximum duration varies by state.

· Most states (i.e. 28 states) limit a trust's duration (e.g. maximum in New York and many other states is “lives in being” plus 21 years);

· Trusts can be perpetual in 18 states additionally Florida is 360 years, Washington 150 years, Utah, Wyoming and Alaska (if a limited power of appointment is utilized) are limited to 1,000 years (South Dakota can be distinguished from all of these 22 states as pointed out in 12/31/04 Trusts & Estates Magazine  article by Dan Worthington entitled "The Problems and Promise of Perpetual Trust Laws");

· Rules are typically based on where the trust is administered;

· Client does not have to live where trust is administered.

• Why an Unlimited Trust Duration?

· Maintain family values and promote social and fiscal responsibility;

· Prevents the trust's termination and thus exposure to both the estate and generation-skipping taxes;

· Remember names of great/great grand parents;

· Incentive clauses ($1 trust income for $2 earned income-based upon W-2);

· Distribution audit to determine suitability of future distributions;

· Monthly stipend for stay at home parent;

· Supplemental income, if beneficiary works for a charity;

· Education costs for family in perpetuity;

· Monthly payments for academic excellence;

· Medical costs for family in perpetuity;

· Charitable donations by family in perpetuity;

· Protection from creditors;

· Real estate purchased for children and grandchildren within trust for asset protection purposes;

· Clause to encourage descendants to stay in marriage;

· Divorce protection for descendants;

· Floating spouse clause (in-laws);

· Deny trust payments, unless beneficiary has a prenuptial agreement;

· Beneficiary conflict clause;

· Asteroid clause ;

· Jurisdiction skipping clause (i.e. trust has the capability to move anywhere in the U.S., world , universe or even galaxy);

· Cryogenics ( i.e. trust will be available when and if needed);

· Flexibility (administrative trustee and investment and distribution committees, trust protector) (See Directed Trustee under Trust Services);

· 360% difference compared with most states;

· Save income and capital gains taxes (state).

• SDTC has extensive experience in advising and working with South Dakota Dynasty Trusts. SDTC's co-founders have been frequently quoted in various publications on the topic of Dynasty Trusts. Additionally, SDTC's co-founders have published several articles on the topic as well as conducted several speeches and presentations to clients and advisors on the subject.

If you have any questions or would like any additional information regarding SDTC's Dynasty Trust, please contact us .