Rob Lambert here with asset protection training com
This is a short video on the Rule Against Perpetuities. it's not an important issue but it's something that's going to confuse you every single time you look at a trust. These stupid little rule against perpetuities savings clauses, find their way into almost every single trust written. I'm doing this short video just so you don't get confused. You can kind of feel like you sort of know what they're talking about and laugh about it when you see it
The Rule Against Perpetuities.
It’s a rule that originated in the mid-1600s in England. It was done by the House of Lords to prevent people from ruling beyond the grave. People wanted to keep their titles in their family for hundreds and hundreds of years, and the House of Lords didn't think it was appropriate for a dead person to direct the lives of people hundreds of years after, these persons are dead. Because of this, they enacted the rule against perpetuities.
The English rule is that a prohibition on a person's right to do something is invalid if it lasts more than the period of life, and being plus 21 years.
If you look at number 3 of this contract, you will see that in this case, the trust cannot last more than 21 years after the death of the last surviving survivor of the descendent now living of this Majesty King George the fifth of England.
That means you look at all of Queen Elizabeth's relatives and say, who's alive on the date we did the trust? The longest distrust that can survive, is 21 years after the death of the last person who's alive on the date that we do this trust. You pick a big family like King George, or sometimes they use Rockefeller to make sure that we can track it. This is kind of silly but it's in every single trust you'll ever see. Normally they do what I commonly do- ask the client, how long do you need this to last? In the case of number 1; you'll see, the 60th anniversary of the date of the settlement. That's a very low and very safe number, you're not going to run into any problems with that.
That’s typical, most of my clients don't intend to rule beyond the grave. I do have some clients that intend to rule beyond the grave, and those clients are well advised to go to one of the state's if they do a domestic trust, which is almost always a bad idea. If you're doing a strip protection, or if they do an offshore asset protection trust; it will go to one of the jurisdictions that permit a trust to last for hundreds and hundreds of years.
Florida will let a trust last more than 300 years right now, I think it's 360. Be that as it may, the life and being plus 21 years is a common, 500 years old rule that you're still going to see in almost every trust you pick up.
Now, the reason I put all these extra words on this page is, I want you to see a provision that commonly finds its way into many trusts.
Number 2: This allows the trustee with the written consent of the protector, to terminate the trust. The written consent of the protector, a normal common provision, that I've pointed out hundreds of times during these lectures is normal.
What's not normal, is to let the trustee shorten the period or the trust period, the term of the trust. This has a limit that says, the trustee cannot shorten a trust to less than three years. That's become pretty common, it's found its way into many trusts. Many trusts that I don't write- yet I just invented this 20 years ago and there's never been challenged, it's not something you should rely upon. Bottom line is, they can easily be taken out; but this allows your trust to be terminated at an early date, but not less than three years after it's put into place. This chronic sometimes gives the client a little comfort that they're not wedded to this sophisticated asset protection plan for the rest of their lives. They can usually get out of it pretty easily if they want to, provided there's no event of duress.
Now, I just put this example up for you to take a look at it, this is not going to change your life unless you plan to rule from the grave. It's not important if you do plan to rule from the grave, go to a place that lets you rule for several hundred years.
Thank you very much and the next videos will be much more meaty, but this one will certainly prevent you from being confused when you look at a typical trust with the typical rule against perpetuities savings clause.
Thank you very much.
Below is a typical example of a rule against perpetuities clause from your average asset protection trust.
Rule Against Perpetuities Savings Clause Example
Trust Period means, the period commencing with the date of this Settlement and ending on the first to occur of the following dates, namely:
(i) The date of the sixtieth anniversary of the date of this settlement;
(ii) The period commencing on the execution hereof and continuing until such day as the Trustee with the consent of the Protector may by deed or written declaration at any time and at its discretion declare to be the date of the expiration of the Trust Period. Notwithstanding the foregoing, the Trustee shall have no authority to shorten the duration of the Trust Period to less than three years or if such an act is the result of any compulsion or Event of Duress.
(iii) The date being twenty-one years after the death of the last surviving survivor of the descendants now living of His Majesty King George V of England.