How long does a trust last depends whether the trust document grants a trustee to remove property or assets upon defined triggering events. Otherwise, the rule against perpetuities may decide for you.
As simple as this issue might appear, when or if a trust will end depends on a number of factors. This includes:
- Type of Trust Created
- Capacity of the Grantor
- Assets Involved
- Terms of the Trust
- State Law of the Grantor
- Residency of the Beneficiary/Trustee
Type of Trust Created
The first element in reviewing trust duration is identifying the type of trust created. For example, A testamentary trust is going to be subject to ongoing court supervision, creating less flexibility.
For those unfamiliar with a testamentary trust, this type of arrangement is created at death using a will. Because these types of documents are highly scrutinized, they have become increasingly unpopular through the years.
Compare this to an inter vivos trust, which allows for a Grantor to be more creative in their timing of asset distribution. When you put the power in the hands of the person or couple creating the trust, by default, have more options.
Trust Lifespan and the Grantor
The duration of an inter vivos trust, like a revocable trust, is closely linked to the lifespan of the grantor. A grantor is the individual who establishes the trust.
Unlike an irrevocable trust, which typically has a fixed lifespan, a revocable trust offers the grantor the flexibility to make changes or revoke the trust entirely while they are alive and have capacity. This feature makes the duration of a revocable trust inherently tied to the grantor’s lifetime.
Living Beneficiaries Impacts Trust Duration
When trust duration or when a trust can get continued, the number of living beneficiaries must be considered. In other words, the Rule Against Perpetuities (“RAP”). This is generally handled by the trustee and their representation.
In general, the rule against perpetuities says that a trust could last for the lives of all relevant people who were alive when the trust was formed, plus twenty-one years. Unfortunately, Minnesota’s RAP is a little more complicated.
Terms of the Trust
How long a trust might last can depend on the terms of the document too. For example, a grantor can end or terminate a trust upon a specific event like reaching a certain age.
Another reason that a trust might end or fail to continue is the result of an economic inefficiency. When trust assets fail to generate sufficient returns to cover administrative costs or sustain the intended distributions, perhaps this means dissolving the trust.
Further, trust duration may be impacted by the situs state of the trust too. The situs state of a trust holds paramount importance due to its legal and jurisdictional implications. It determines the governing law, tax regulations, and court jurisdiction for the trust.
How Long Can a Trust Last?
As you can imagine, trust duration is different in every state. Every state has their own rule on determining how long a trust instrument can last. Some states are favorable, while other states are not.
States that suggest giving trusts an opportunity to last up to 360 years include Alabama, Florida, Georgia, Mississippi, Nevada, and Tennessee.
A state that has hinted at granting trusts an opportunity to last up to 500 years is Arizona. States that have suggested a trust duration of up to 1,000 years are Alaska, Colorado, and Wyoming.
Believe it or not, there are other states that suggest an unlimited period that a trust can continue. This includes Arkansas, Delaware, District of Columbia, Hawaii, Idaho, Illinois, Kentucky, Maine, Maryland, Michigan, Missouri, Nebraska, New Hampshire, New Jersey, North Caroline, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Utah, Virginia, and Wisconsin.
Trust duration is a powerful tool in shaping one’s legacy and securing the future. By understanding the intricacies of trusts, individuals can navigate the complexities of estate planning with confidence.
May your journey crafting a secure and meaning.
