Drew Edmundson <drewsbeagles[at]hotmail.com> wrote:
- quote -

Very interesting. I went to look at the Alaska statutes -
they did indeed abolish the common law rule against
perpetuities. They created something like it, but it could
well allow the trust to law 1000 years rather than 100.
It's all pretty complicated, and I didn't take the time to
become an expert.

The reason for generation skipping trusts in the first place
was to avoid the wealthy setting up these kinds of trusts.
But I suppose the exemption is large enough that it could
still make sense to set up an Alaskan trust under some
circumstances.

Stu

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

That is not my understanding. Hopefully our esteemed moderator
will allow this link through (it is to dook university):

https://www.law.duke.edu/journals/al.../alr18p253.pdf

Note on page 4 of the PDF the line: "On April 2, 1997,
Alaska effectively eliminated its Rule Against Perpetuities
with regard to beneficial interests held in trust, but only
where all or part of the income or principal of the trust
could be distributed at the trustee's discretion to a person
who was living when the trust was created."

Perhaps the author is incorrect or perhaps we are
disagreeing on semantics (he does say "effectively"). I am
not an attorney, I was just relaying the information I have
been told and read from those who are attorneys.

--
Drew Edmundson, CPA
Cary, NC

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Stuart A. Bronstein wrote:

- quote -

The Mesa Royalty trust includes this in its charter, as shown
in
sec.edgar-online.com/2005/08/09/0001104659-05-037834/Section2.asp
and other places:
======================
The Trust may also be terminated at the expiration of
twenty-one years after the death of the last to die of all
of the descendants living at the date of execution of this
Trust Agreement of Joseph P. Kennedy, late father of the
late President of the United States, John F. Kennedy.
======================

That should be good for well over a hundred years.

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Drew Edmundson <drewsbeagles[at]hotmail.com> wrote:
- quote -

I did a google search on dynasty trusts. The first three
links didn't work - there was nothing there. The fourth
link was to a page of information that was by someone who
had no clue what he was talking about.

I also checked the Alaska law on the subject. They appear
to still follow the rule against perpetutities. The
difference is that normally the rule works prospectively.
That is to say that you need to be able to determine who
will be the beneficiaries and when the trust will terminate,
at the time it is created.

In Alaska, and several other states, the rule works
retroactively. That is to say that they take a wait and see
approach. The rule does not void trusts based on
information had when they are created, but later on as time
goes by.

But the trusts still must terminate within the time
specified by the rule.

Stu

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

Some states, Alaska comes to mind, allow trusts to continue
for an unlimited amount of time. Just do an Internet search
on "dynasty trust" for more information. One of the first
hits I got said there are 13 states that now allow them.
One does not have to be a resident of these states to
establish a dynasty trust.

--
Drew Edmundson, CPA
Cary, NC

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"ed" <edcosoft[at]sbcglobal.net> wrote:

- quote -

But don't forget the rule against perpetuities. The trust
must terminate at some point and the property distributed to
the heirs at that point. The amount of time is not specific
in terms of numbers, but is calculated by adding 21 years to
the date of death of the last person to die out of a
specified group.

Stu

Moderator:
21 years bewteen deaths. I can live with that.

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- quote -

There's 2 considerations here. 1. You presume you are the
only skipped generation and your children the final
beneficiaries and will get the money when you die, or when
they reach 35 or 40 or some other arbitrary age. 2. Better
yet, make them ALL skipped generations, you, your children,
your grandchildren, great grandchildren. etc. etc. It's
called a Dynasty Trust.

All beneficiaries are protected from Liability, divorce,
bankrupt etc as long as the money is left in the trust and
they don't have a general power of direction over it (except
limited powers). You can draw the trut instrument as
controlling, or as free, as you want. Remember, it's instead
of giving the cash outright because you want to provide the
inherent protection of trust funds as well as to avoid
Estate Taxes, whatever they are, for as long as possible.
Consider what your children are going to do with the funds?
Probably reinvest them and create another trust to skip
their next generation. Why not make one trust to serve ALL
your generations of heirs?

ed

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"nomail1983[at]hotmail.com" <nomail1983[at]hotmail.com> wrote:

- quote -

That's generally correct.

- quote -

If drafted properly and depending on the laws of the
individual state, in general I think it would, until the
trust is finally terminated. At that point the property
will be distributed out of the trust, and will then become
available to the beneficiaries' creditors.

Stu

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- quote -

Thanks for clarifying that point. That is the way I
understood it, but I confess that I am not paying attention
to the details at this point. I'm a "pilot" when it comes
to new concepts. First I fly at the 30,000 level to get a
broad view of landscape. Then I swoop down to tree-top
level to look at the details. At this point, I am still at
the 30,000 level, but I am "starting my descent" ;-).

With respect to liability protection (bankruptcy, lawsuits,
etc), my understanding is that it protects those assets from
liability claims against __me__ (the "skipped" generation).

But does it protect those assets from liability claims
against the beneficiary while the GST is in effect (i.e.
while I am still alive)?

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- quote -

Ok, yes they can be drafted that way.

- quote -

Well, the income would also be free of FET if it's sitting
in the beneficiary's bank account.

- quote -

As long as the trustee cooperates. In some cases that's a
pretty big "if."

- quote -

The amount is technically the same as the lifetime exemption
amount for estate tax, but that will go back to $1,000,000
for anyone dying in or after 2010.

Stu

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- quote -

Well, that's the imimediate advantage but there are others.
While in trust the funds are protected from bankruptcy,
divorse and beneficiary incompetence. The capital grows,
untaxed for FET, through several generations. A trust can
be worded to *almost* mimic direct ownership in that it can
loan money to beneficiaries, buy property for them,
guarantee loans, etc.

If you want a GST get a different lawyer that is Board
Certified in Estate Planning, or the equivilent in your
State. Do not try to add wording onto an existing trust.
You can only pass $1 million per donor free of GSTax so the
size of the estate doesn't matter. The other $XX million
can have the same provision but must give successive
beneficiaries at least a power to appoint to their creditors
or our other descendents in order to keep that excess
portion IN their estates and hence free of any GSTax.

So, as a possible example our GST, after we both die, splits
into shares, one for each of our childrens' families with
that child the trustee of his family's trust but, a majority
of ALL beneficiaries of all trusts can elect a co-trustee
(or sole trustee if there is no other trustee) or fire the
trustee for any trust. All trustees must be a decendent of
ours unless it is a corporate trustee. No beneficiary can
appoint their interest to a non-descendent of ours.

The net effect is to keep the money in our family and
controlled by our family . Each family can do virtually
whatever they want with the money from squandering it on
themselves to preserving capital to produce income for their
heirs. So, from that standpoint, it's no different then
just giving them the cash except for the tax and protection
advantages.

ed

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nomail1983[at]hotmail.com wrote:
- quote -

You're right about that, and one reason I've seldom used a
GST - unless there's a lot of money involved and it can be
made to work whatever the likely future is, it may not be
worth the trouble.

I believe that the effects of a GST can actually be achieved
along with the flexibility to deal with the future. But I'm
not fully versed on all the nuances of them at the moment,
so I couldn't give you details.

- quote -

I believe if there is an independent trustee that isn't a
problem.

- quote -

That's not a good reaction from a lawyer. It's roughly
equivalent to saying, "go ahead and rob the bank - it's not
illegal unless you get caught."

- quote -

If qualifying for a loan might be a concern, in my judgmnet
there's not enough money at stake to go to the trouble of a
GST. It doesn't save anything in your mother's estate, only
in yours.

- quote -

The benefit of a GST is that a limited amount of money taxed
in your mother's estate won't be taxed again in yours.
That's it. If you don't think there will be enough in your
estate for estate tax to be a big problem when you die, I
don't think you need to bother.

Stu

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nomail1...[at]hotmail.com wrote:
- quote -

Well it agaoin comes down to the size of the estate and the
size of the funds going to you. If the funds are large
enough where you will be getting plenty of $ then legacy
planning is always a good idea when there is extra cash.

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"Stuart A. Bronstein" <spamt...[at]lexregia.com> wrote:

- quote -

But who knows what the exemption amount, if any, will be at
the time of death? And who knows what the financial status
of the beneficiaries of the current living trust (i.e. the
"skipped generation") will be at the time of __their__
deaths?

That is one of my problems with a GST: we are making a
decision now (to write the creation of GSTs into the current
living trust) based on ass-u-me-tions about conditions, ergo
tax benefits, long after the time of death.

Another concern is the restrictions on the use of the funds
in the GST by the beneficiaries of the current living trust
(i.e. the presumptive trustees of the GSTs). My mother has
no intention of limiting how her immediate beneficiaries
(me, for example) use the funds they inherit. The __only__
intended purpose of GSTs would be the potential tax
benefits.

Some of the restrictions are de jure (the IRS limitation,
viz. for health, education, support and maintenance in
accustomed manner of living). When I asked my mother's
attorney, he scoffed at the concern ("who is going to
enforce it?"). But when I asked about specific hypothetical
uses -- e.g. to buy a Maserati or a palatial second home in
Maui? -- he said: well, maybe not that. What about using
the funds to start a business? He said "sure!". Hmm, that
does not sound like "support or maintenance" to me.

(Who would enforce it? Well, the beneficiaries of the GSTs,
if no one else. We hear about such lawsuits all the time
among "the rich and famous".)

Some of the restrictions are de facto. If I choose to
distribute "my" estate (including the GST funds for this
accounting) disproportionately, I cannot easily apply that
proportion to the funds covered by the GST. (Although I
might get lucky and the GST funds are less than the
proportion of "my" estate that I would to give to the GST's
beneficiary anyway.)

Another thought: I believe that the funds in a GST for
which I am the trustee (i.e. I am the "skipped generation")
are not considered mine. That is a good thing for the
purpose of sheltering those funds from liability claims. But
it might be detrimental if I were to apply for a loan, for
example. Again, it is not my mother's intention to set
aside some of her inheritance for the "second" generation
(i.e. the beneficiaries of any GSTs).

My mother's estate planning lawyer says a GST is a
"no-brainer". But aren't those valid considerations? Did I
overlook any other potential concerns about GSTs?

PS: I am not saying that any of those concerns trump the
benefits of a GST. I am simply saying that they seem to be
issues to weigh against the benefit. That is, a GST is
__not__ a "no-brainer" in my mind.

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nomail1983[at]hotmail.com wrote:

- quote -

Depends on the size of the estate. If it's under the GST
exemption amount ($1,000,000 last time I had occasion to
look), there's little or no reason to do that unless the
kids have a lot more money than the parents.

If the estate is larger, there is more reason for using a
GST.

Stu

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I am looking for educated opinions about Generation Skipping
Trusts. I understand and appreciate the tax benefit. But
when I asked my mother's estate planning attorney (whom I
just met) about my concerns, he dismissed them and said that
the GST is "a no-brainer". What do other estate planning
professionals think?

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