I often sit with clients who have spent a lifetime building a business or stewarding a family fortune. Their concern is no longer about their own financial security—it’s about the generations to come. They ask, “I want this to last. I want to provide for my grandchildren, and their children. Can we set up a trust that runs forever?”
It’s a question of legacy, not just assets. The legal tool they’re asking about, sometimes without knowing its name, is a dynasty trust. A dynasty trust transfers wealth while minimizing taxes and protecting assets from beneficiaries’ creditors or divorcing spouses. But the idea of a trust that lasts “forever” runs into a very old legal principle—one that New York takes seriously.
The Rule Against Perpetuities: A Hard Stop
For centuries, common law has been suspicious of fortunes locked away from commerce indefinitely. This suspicion is codified as the Rule Against Perpetuities (RAP). The rule prevents property from being tied up in a trust for an unknowable, and potentially infinite, period. It ensures that assets eventually become fully owned by someone who can sell, invest, or dispose of them as they see fit.
Some states—like South Dakota, Delaware, and Alaska—have become popular jurisdictions for trusts because they have either abolished the RAP or extended it for hundreds of years. This allows for the creation of true “perpetual” dynasty trusts. New York has not.
Our state law, specifically Estates, Powers and Trusts Law (EPTL) § 9-1.1, maintains a modern version of the rule. An interest in a trust must vest—become definite—within a period measured by “lives in being” when the trust is created, plus 21 years. This means a New York trust cannot last forever. It has a built-in expiration date, albeit one that can be decades or even more than a century in the future.
Stewardship Within New York’s Framework
Does this mean New Yorkers cannot plan for a long-term legacy? Absolutely not. While a New York trust cannot be perpetual, a well-drafted instrument can provide for multiple generations. Stewardship is still possible.
By carefully selecting the “measuring lives” used to define the trust’s term, we can design a structure that provides for children, grandchildren, and even great-grandchildren. For the duration of the trust, a trustee with a strict fiduciary duty manages the assets according to the creator’s instructions. This provides significant protection. The assets are not owned outright by the beneficiaries, so they are generally shielded from their personal liabilities, lawsuits, or marital disputes.
The trust can be structured to make distributions for specific needs like education, healthcare, or a down payment on a home. It can also be designed to encourage productivity, perhaps by matching a beneficiary’s earned income. This is not about locking wealth in a vault—it is about creating an intentional, deliberate framework for your family’s future.
When Looking Beyond New York Makes Sense
For some families, particularly those with substantial assets or specific goals requiring a perpetual structure, establishing a trust in another state is a prudent option. This involves selecting a “situs”—a legal home—for the trust in a jurisdiction like Delaware or South Dakota. A trustee, often a corporate trust company, must be located in that state.
This is a significant decision. We weigh the benefits of a perpetual trust against other factors. We must consider New York’s state income tax rules for trusts created by residents, even if administered elsewhere. The administrative costs of an out-of-state institutional trustee can also be higher.
Choosing a situs is not a simple matter of picking the state with the longest trust duration. It requires a careful analysis of the family’s asset composition, their long-term vision, and the tax implications. It’s a conversation about trade-offs, not a search for a single perfect answer.
The goal is to create a durable legacy. Whether that is accomplished through a 100-year trust governed by the laws of our home state or a perpetual trust administered from afar, the underlying principle is the same: thoughtful planning for the generations you may never meet.
If you are contemplating how to structure your assets for a multi-generational legacy, the first step is a clear accounting of your goals. We can schedule a meeting to review your family’s objectives and discuss whether a long-term trust structure is the right vehicle to achieve them.
