While giving a person flexibility in distributing their property, trusts do have some limitations. One of those limitations is known as the "Rule Against Perpetuities." Happily for many, Pennsylvania abolished that law in 2006 by passing Title 20 PSA § 6107.1. However, the new law only applies to interests created on or after January 1, 2007.
For trusts created before that date, the law contained in Section 6104 et seq of Title 20 still stands. It provides that any interest must vest within 21 years after lives in being. The intention of the law was to limit trusts from continuing forever. History and experience have established that the rule is not necessary. For those interested in knowing about the law in detail, click here. For others, you need only be aware that a trust created before January 1, 2007 should not continue for 21 years after the last life in being at the time the trust was created. That may limit trust bequests to great grandchildren who were not alive at the time a trust was established.
The Pennsylvania Superior Court recently decided a case where that law came into play. It was Re: In the Matter of Estate of George McFaddden, 2014 PA Super 203, decided September 18, 2014.This case dealt with a trust that was established in 1929 before the stock market crash. It is always a good idea to enlist the help of an experienced attorney when drafting a trust, because the "Rule Against Perpetuities" is one of several issues that confront the drafter. Trusts can be very useful, and are sometimes essential, but should be drafted by someone with the appropriate experience.
Stay well until the next post:
Bob Gasparro, Esq.
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