USRAP — Uniform Statutory Rule Against Perpetuities

GST — generation-skipping transfer

POA — power of appointment

bp — bonus points

PFTC — private family trust company

Top jurisdictions are bolded in blue. Florida and Wyoming (honorable mentions) are also bolded in blue.

UTC — Uniform Trust Code

FLP — family limited partnership

LLC — limited liability company

JF — judicial foreclosure

SR — sole remedy

Second — jurisdiction has codified Restatement (Second ) of Trusts

Third? — jurisdiction is a UTC jurisdiction and it will take future litigation to determine whether the UTC adopted the Restatement (Third) of Trusts

No statute — the issue hasn't been addressed by statute and it will be up to the courts to determine whether the Restatement Second's or Restatement Third's view prevails? — the jurisdiction is undecided whether charging order is the sole remedy for creditors

28 Perpetual and Close-to-Perpetual Trust Jurisdictions

		Rule Against Perpetuities (RAP)				Taxation		Modern Trust Laws									Asset Protection (AP) — Third-Party Trusts								Migration
Situs	Year RAP	Common Law Rule Modified	RAP	Murphy Case USRAP	Effective GST Tax Applies	State Income Limit	State Premium Tax	Limited Tax	Change POA	Directed Trust of Situs	Trust Protector Statute	Reformation/Decanting Statute	Special-Purpose Statutes	Enhanced Virtual Entities	Privacy Representation	Popular PFTC Laws	Discretionary Trust Protection				Dominion/Discretionary	Protects Alter Control	Protects Trust Ego	Self-Settled Chargin Order Legislation	Sole Remedy Look to Beneficiaries' Protection Resources
																	Not Enforceable State	Creditor Can't Right	Second Attach	Definition of Judicial Review
ID	1957	Abolished	No	Yes	Perpetual	Yes	170 bp	IRC Section 2041(a)(3)	Perpetual	No	Yes	No/limited	No	No	Public	No case law	No case law	No case law	No case law	No	No	No	FLP - JF LLC - JF	No statute
WI	1969	Abolished	No	Yes	Perpetual	Tax residents	350 bp	IRC Section 2041(a)(3)	Perpetual	No	No	No	No	No	Public	No	No case law	No case law	No case law	No case law	No	No	No	FLP - ? LLC - ?	No statute
SD	1983	Abolished	No	Yes	Perpetual	No tax	8 bp	IRC Section 2041(a)(3)	Perpetual	Yes	Yes	Yes/yes	Yes	Yes	Seal	Yes, regulated	Yes	Yes	Yes	Yes	Yes	Best	Best	FLP - Best LLC - Best	Second
DE	1995	Abolished	No	Yes	Perpetual	Tax residents	200 bp	IRC Section 2041(a)(3)	Perpetual	Yes	Yes	Yes/yes	Yes	Limited	Seal 3 yrs	No	No	Yes	Probably1	No	Yes	No	Best	FLP - Best LLC - Best	No statute
AZ	1998	Opt out	No	No	Uncertain	Yes	200 bp	IRC Section 2041(a)(3)	No	Yes	Yes	Yes/yes	No	Yes	Public	No	No	Conflicting provisions2	No	No	No	No	No	FLP - SR LLC - SR	Third?
IL	1998	Opt out	No	No	Uncertain	Tax residents	50 bp	IRC Section 2041(a)(3)	No	No	No	No	No	Yes	Public	No	Case law	Case law	Case law	Case law	No	No	No	FLP - JF LLC - JF	No statute
MD	1998	Opt out	Yes	No	Uncertain	Yes	200 bp	IRC Section 2041(a)(3)	No	No	No	No	No	No	Public	No	No case law	Case law	Probably case law3	Case law	No	No	No	FLP - JF LLC - JF	No statute
ME	1999	Opt out	No	No	Uncertain	Yes	200 bp	IRC Section 2041(a)(3)	No	Yes	No	No	No	No	Public	No	No	No4	No	Probably5	No	No	No	FLP - JF LLC - JF	Third?
NJ	1999	Abolished	No	Yes	Perpetual	Yes	210 bp	IRC Section 2041(a)(3)	Limited by statute	No	No	No	No	No	Public	No	No	No	No	No	No	No	No	FLP - SR LLC - Best	No statute
OH	1999	Opt out	No	No	Uncertain	Tax residents	140 bp	IRC Section 2041(a)(3)	No	Yes	No	No	No	No	Public	No	No	Yes	Probably6	Very restrictive7	No	No	No	FLP - JF LLC - ?	Third?
RI	1999	Abolished	No	No	Uncertain	Yes	200 bp	IRC Section 2041(a)(3)	No	No	No	Yes/yes	No	No	Public	No	No	Case law	Case law	Case law	No	No	Yes	FLP - ? LLC - ?	No statute
AK	2000**	Abolished	No	Yes but POA	Perpetual unless POA	No tax	10 bp	1,000 yrs IRC Section 2041(a)(3)	Perpetual unless POA	Yes	Yes	Yes/yes	Yes	Yes	Limited filings	No	No	Yes	No	No	No	No	Best	FLP - Best LLC - Best	No statute
VA	2000	Opt out	Yes	No	Uncertain	Yes	225 bp	IRC Section 2041(a)(3)	No	Yes	No	No	No	No	Public	No	No	No	No	No	No	No	No	FLP - Best LLC - Best	Third?
CO	2001	No	1,000 yrs	No	If vesting 365 yrs	Yes	200 bp	IRC Section 2041(a)(3)	Limited 1,000 yrs	Yes	No	No	No	No	Public	No	Case law	Case law	Case law	Case law	No	No	No	FLP - ? LLC - JF	No statute
FL	2001	No	360 yrs	No	If vesting 360 yrs	No tax	150 bp	IRC Section 2041(a)(3)	Limited TN	Yes	No	Yes/yes	No	Yes	Public	No	No	Yes	No	No	No	No	No	FLP - Best LLC - Best	Third?
MO	2001	Abolished	No	Yes	Perpetual	Yes	200 bp	IRC Section 2041(a)(3)	Perpetual	No	No	No	No	No	Public	No	Yes	Yes	No	No	No	No	Yes	FLP - ? LLC - ?	Third?
DC	2002	Opt out	Yes	No	Uncertain	Yes	170 bp	IRC Section 2041(a)(3)	No	Yes	No	No	No	No	Public	No	No	No	No	No	No	No	No	FLP - ? LLC - JF	Third?
NE	2002	Opt out	Yes	No	Uncertain	Yes	100 bp	IRC Section 2041(a)(3)	No	Yes	No	No	No	No	Public	No	No	No	No	No	No	No	No	FLP - JF LLC - ?	Third?
WA	2002	Yes	150 yrs	No	Uncertain	No tax	200 bp	IRC Section 2041(a)(3)	No	Yes	No	No	No	Yes	Public	No	No	No	No	Little case law	No	No	No	FLP - JF LLC - ?	No statute
WY	2003	Yes	1,000 yrs	No	If vesting 1,000 yrs	No tax	75 bp	IRC Section 2041(a)(3)	Limited UT, CO	Yes	Yes	Yes/yes	Yes	Yes	Public	Yes, unregulated	No	Yes	Uncertain8	Yes	No	No	Yes	FLP - ? LLC - Best	No statute
UT	2004	No	1,000 yrs	No	If vesting 1,000 yrs	Yes	225 bp	IRC Section 2041(a)(3)	Limited WY, CO	No	No	No	No	No	Public	No	No	No	No	No	No	No	Yes	FLP - ? LLC - JF	Third?
NV	2005	No	365 yrs	No	If vesting 365 yrs	No tax	350 bp	IRC Section 2041(a)(3)	No	Yes	Yes	Yes/yes	Yes	Yes	Public	Yes, unregulated	No	Yes	Yes	Ambiguous9	Yes	Good	Best	FLP - Best LLC - Best	Second
NH		2006	Abolished	No	Yes	Dividends, Perpetual	interest	IRC Section 125 bp	2041(a)(3)	Perpetual	Yes	Yes	Yes/yes	Yes	Yes	Public	Yes	Yes10	No	No	Case law11	No	No	FLP - JF Yes	LLC - ? Third?
TN	2007	Opt out	360 yrs	No	If vesting 360 yrs	Yes	175 bp	IRC Section 2041(a)(3)	Limited FL	Yes	No	No	No	No	Public	No	No	No	No	No	No	No	Yes	FLP - ? LLC - SR	Third?
NC	2007	Abolished	No	Yes	Perpetual	Yes	190 bp	IRC Section 2041(a)(3)	Perpetual	Yes	No	No	No	No	Public	No	No	Uncertain12	No	Yes	No	No	No	FLP - ? LLC - SR	Third?
PA	2007	Abolished	No	No	Uncertain	No tax	200 bp	IRC Section 2041(a)(3)	No	No	No	No	No	No	Public	No	No	No	No	No	No	No	No	FLP - JF LLC - ?	Third?
MI	2008	Opt out	No	No	Uncertain	Yes	125 bp	IRC Section 2041(a)(3)	No	No	No	No	No	No	Public	No	Yes	Yes	Probably13	Yes	No	No	No	FLP - JF LLC - ?	Third?
HI	2010	Opt out	No	No	Uncertain	Yes	275 bp	IRC Section 2041(a)(3)	No	Yes	Yes	Yes/yes	No	No	Public	No	No	No	No	No	No	No	Yes	FLP - JF LLC - JF	No statute

*Arranged by year that the RAP or USRAP was modified or repealed. **Alaska first modified its laws in 1997, but didn't adopt the Murphy approach until 2000.

Endnotes

1. Title 12 Delaware Code Section 3315(a) states, “Where discretion is conferred upon the fiduciary with respect to the exercise of a power, its exercise by the fiduciary shall be considered to be proper unless the court determines that the discretion has been abused within the meaning of § 187 of the Restatement (Second) of Trusts not §§ 50 and 60 of the Restatement (Third) of Trusts.” While a step in the right direction, Delaware's statute isn't nearly as certain as a statute that specifically lists that judicial review is limited to: (1) improper motive; (2) dishonesty; and (3) failure to use judgment.
2. Arizona Revised Statutes (A.R.S.) Section 14-10501 states that a creditor can't attach a discretionary interest. However, A.R.S. Section 14-10504 allows a child support exception creditor to attach. Query: If a child support exception creditor can attach, does this create a property interest? If so, any federal claim may attach the trust under federal law.
3. First National Bank of Maryland v. Department of Mental Hygiene, et al., 399 A.2d 891 (Md. App. Ct. 1979) uses the Bogert judicial review standard for a discretionary trust: (1) improper motive; (2) dishonesty; and (3) acting arbitrarily. Bogert's standard is a little more expansive than the Restatement (Second) of Trusts (Restatement Second) Section 128 comment d, which uses “failure to use judgment,” rather than “acting arbitrarily.” Naturally, since Austin W. Scott, Jr. was the reporter for the Restatement Second, Scott on Trusts uses the more restrictive standard. See also Offutt v. Offutt, 102 A.2d 554 (App. Ct. 1954) using only improper motive and dishonesty.
4. 18-B Maine Revised Statutes Annotated (M.R.S.A.) Section 501 provides that unless a trust has a spendthrift clause, any creditor may attach. The common law discretionary trust protection against attachment wasn't preserved, regardless of Maine's comment under Section 504 indicating an intent to preserve the discretionary/support distinction.
5. 18-B M.R.S.A. Section 814 provides some guidance to a court on what a discretionary distribution may be by stating, “A trustee's power to make distributions is discretionary notwithstanding terms of the trust providing that the trustee ‘shall’ make distributions exercising a discretionary power, with or without standards.”
6. For a wholly discretionary trust, the Ohio Uniform Trust Code (UTC) removes the judicial standard of reasonableness, similar to Restatement Second Section 187. However, it doesn't use the much more precise language that a judge will only review a trustee's discretion for an improper motive, dishonesty or failure to use judgment. Richard Covey, in Practical Drafting (April 2007) at p. 8,918 criticized the Ohio's UTC due to its very limited definition of a discretionary trust. For an Ohio “wholly discretionary trust” (that isn't a special needs trust), the trust can't have any standards or guidelines. We agree with Covey's concerns and suggest the much better definitions of a discretionary trust found in the Restatement Second, common law and more precisely, in the Michigan and New Hampshire UTC or under South Dakota's or Nevada's discretionary support statutes.
7. Realizing the problems with a single judicial review standard of “good faith,” Douglas McLaughlin, the primary drafter of the Wyoming UTC, was instrumental in deleting UTC Section 814(a). Unfortunately, it's still uncertain whether a Wyoming judge will apply a Restatement Second or Restatement (Third) of Trusts judicial review standard.
8. Nevada Revised Statute Section 163.017(b) classifies a distribution interest as a support interest, “if it contains a standard for distribution for the support of a person which may be interpreted by the trustee or a court as necessary.” Leaving it up to a court to decide when distribution language will create an enforceable right to a distribution gives little guidance on how to draft a support trust or a discretionary trust.
9. A recent New Hampshire Supreme Court case, In re Goodlander, 20 A.3d 199 (N.H. 2011), favorably interpreted Section 814(a) of the New Hampshire UTC so that a discretionary current distribution interest wasn't found to be either an enforceable right or a property interest in the marital property context. We're still somewhat uncertain whether the good faith standard preposition may have some effect in the imputation of income in a child support alimony type of case when no distributions have been made. See Ventura County Department of Child Support Services v. Brown, 117 Cal. App. 4th 144 (Cal. App. 2004), in which a California judge held that a child support exception creditor had more rights than the beneficiary. Most commentators disagree with the court's holding, but it's an example of how a court can easily twist a judicial review standard such as “good or bad faith,” since the term is ambiguous. See Daniel G. Worthington and Mark Merric, “Which Situs is Best?” Trusts & Estates (January 2010, chart endnotes).
10. In re Goodlander, supra note 10.
11. North Carolina General Stautes (N.C.G.S.) Section 36C-5-501 provides that a creditor can't attach a discretionary trust. However, for child support, N.C.G.S. Section 36C-5-504(d) allows a child support creditor to attach and force a distribution from a discretionary interest. Does a discretionary beneficiary of a North Carolina trust now have an enforceable right and/or property interest since a creditor can attach a discretionary interest? Further, under federal law, if a beneficiary has a property interest, then federal super creditors will now also be able to attach North Carolina trusts.
12. While Section 7815 of the Michigan UTC states the Restatement Second Section 122 elements of improper motive, dishonesty and failure to use judgment as a basis of an abuse of discretion, it doesn't limit a judge to only these three circumstances.

— Daniel G. Worthington & Mark Merric