By John Masson
While the bleak retirement prospects for members of Generation Y have been in the news lately ("Why Gen Y may face least secure retirement," USA Today, April 22,), at least one future group won't be much affected by a weak labor market, an ongoing housing slide, and the demise of the fixed-benefit pension plan.
That future group? Those fortunate enough to have incredibly rich ancestors, living today, and willing to take advantage of states that allow the creation of perpetual trusts. Such perpetuities have long been viewed askance by estate experts, largely because they're theoretically capable of creating a wildly ballooning gaggle of argumentative beneficiaries for hundreds of years into the future.
Among those skeptical estate experts is Lawrence Waggoner, '63, Lewis M. Simes Professor Emeritus of Law and the Reporter for the American Law Institutes' freshly published Restatement (Third) of Property: Wills and Other Donative Transfers.
His ideas on perpetual trusts are summed up in the title of his essay on the topic, which appears on the Social Science Research Network: "From Here to Eternity: The Folly of Perpetual Trusts" (available for free download).
So, who benefits from such trusts? Banks, which are hungry for new trust business, Waggoner said, as well as lawyers with super-rich clients who are attracted to the possibility of avoiding the hated generation-skipping transfer tax, possibly for hundreds of years.
The problem, Waggoner said, is that representatives of neither of those two groups will be on hand to deal with the fallout, 300 years from now, as some of the thousands of beneficiaries of each trust—most of whom will be complete strangers to one another—get into a beef in court.
While the bankers and lawyers may be gone by then, somebody will have to be on hand to settle the score.
"Those employees, three- or four-hundred years from now, are going to be very unhappy with their predecessors," Waggoner said. "It's short-term thinking. The people who are creating these trusts, and the bankers who are pushing for them, are not going to be around when the problems arise."
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