For centuries, English common law placed a hard limit on how long a trust could tie up property: roughly a life in being plus 21 years, a rule designed specifically to stop wealthy families from controlling assets from beyond the grave indefinitely. Then, starting with South Dakota in 1983, American states began quietly repealing that rule inside their own borders — not out of philosophical disagreement with it, but as a deliberate strategy to attract trust business. Today, more than 20 states plus the District of Columbia have abolished or substantially weakened it.¹ A trust structure that English law spent centuries preventing is now, in a specific set of American states, explicitly legal to run forever.
What made the old rule necessary, and what changed
The rule against perpetuities existed to balance a real tension: a person’s right to control their own property against society’s broader interest in property eventually landing in the hands of someone who can freely buy, sell, or otherwise put it to use, rather than remaining locked in a trust’s terms indefinitely, generation after generation. A dynasty trust is precisely what that rule was built to prevent — an irrevocable trust designed to last far longer than a single generation, in states that permit it, potentially forever, holding and growing assets for the benefit of descendants across multiple generations without the trust ever needing to terminate and distribute everything outright.
The tax mechanism that makes “forever” financially attractive
A dynasty trust’s appeal isn’t just structural — it’s built directly on top of the generation-skipping transfer (GST) tax exemption. If a grantor allocates their full lifetime GST exemption ($13.99 million in 2025, rising to $15 million in 2026) to a properly structured dynasty trust when it’s funded, the trust’s assets, and all future appreciation on those assets, can pass down through multiple generations without triggering additional estate tax or GST tax at each successive generation’s death — because the assets are never actually owned outright by any individual generation along the way.² In a state that has also abolished the rule against perpetuities, there’s no legal requirement that the trust ever terminate and distribute its assets outright, meaning the tax-advantaged structure can, in principle, continue indefinitely.
Why the state where the trust is established matters more than the state where the family lives
This is the detail that surprises people encountering dynasty trusts for the first time: the trust doesn’t need to be created in the state where the grantor or beneficiaries actually live. A family in a state that retains the rule against perpetuities can still establish a dynasty trust by choosing a trustee and situs in a state like South Dakota, Delaware, Alaska, or Nevada — all of which compete actively for trust business by offering perpetual trust laws, strong asset protection statutes, and, in some cases, no state income tax on trust income.³ This has created a genuine, ongoing competition among a handful of states to be the preferred jurisdiction for exactly this kind of long-duration trust planning.
What a family actually gives up for “forever”
The tradeoff scales with the trust’s duration. An irrevocable trust that might run for eighty or a hundred years, let alone indefinitely, has to be drafted with extraordinary care around trustee succession, distribution standards that can flex across generations whose needs no one alive today can predict, and mechanisms for beneficiaries the grantor will never meet. A dynasty trust drafted narrowly around one generation’s specific circumstances can become a poor fit, or an outright obstacle, for great-grandchildren facing a completely different financial and family landscape a century later — with no living grantor available to adjust the terms. This isn’t a hypothetical risk; it’s the central design challenge of writing instructions meant to govern decisions for people who don’t exist yet.
The honest scope of who this tool is actually for
A dynasty trust is a strategy for estates large enough that the GST exemption and the multi-generational tax deferral it enables are meaningfully valuable — which, as with the underlying GST tax itself, describes a small fraction of American households. For the overwhelming majority of families, the complexity, ongoing administrative cost, and rigidity of a perpetual trust structure solves a problem — multi-generational estate tax erosion — that their estate was never large enough to actually have.
Sources
1. Connecticut General Assembly, Office of Legislative Research, Report 2010-R-0250, “Dynasty Trusts” — more than 20 states and the District of Columbia have adopted laws abolishing or modifying the common-law rule against perpetuities to permit dynasty trusts.
2. Congressional Research Service, IF13053, “The Generation-Skipping Transfer Tax (GSTT)”; 26 U.S. Code § 2631 — lifetime GST exemption amounts and their role in shielding multi-generational trust transfers from GST tax.
3. State trust statutes of South Dakota (S.D. Codified Laws § 43-5-8), Delaware, Alaska, and Nevada — among the states that have abolished the rule against perpetuities and actively compete for trust situs business through favorable trust and tax law.
This article is for educational purposes only and does not constitute legal, tax, or financial advice. Dynasty trust structuring, choice of trust situs, and GST exemption allocation are highly technical and consequential decisions. Consult a licensed estate attorney and tax professional before establishing a dynasty trust.
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