First Place Winner 2004

Tye J. Klooster
Tampa Bay, Florida
Editor’s Note
This article is by Tye J. Klooster, the winner of the First Annual Mary Moers Wenig Student Writing Competition sponsored by the ACTEC Legal Writing Committee. Tye attended the University of Iowa, where he earned a BBA in Finance. He received his J.D. in May 2003 from Drake University Law School and was the editor-in-chief of the Drake Law Review. In May 2004 he received his Master of Laws in Taxation from the NYU School of Law. Tye is joining Holland & Knight LLP as a member of the private wealth services practice group in the Tampa Bay office.
Lauren D. Burger Krauthamer won second place with her article on “The Limitation That Hackl Creates for Family Limited Partnership Interests and Ways to Plan in Lieu of That Decision.” Lauren received her J.D. from American University and her MBA from American University in December 1999. In May 2004 she received her Master of Laws in Taxation from Georgetown University Law Center. Lauren is an associate at the firm of Pasternak and Fidis, PC, in Bethesda, Maryland.
Cheri L. Riedel was third place winner with her article on “The Impact of Modern Reproductive Technology on the Law of Probate: ‘Frozen Pops’ and Inheritance.” Cheri received her JD from the University of Memphis Cecil C. Humphrey School of Law in May 2004. She also recently completed a yearlong judicial clerkship with ACTEC Fellow Judge Robert Benham of Division One of the Shelby County Probate Court.
The papers of the second and third place winners can be found on the ACTEC website.
The ACTEC Foundation generously provided the funding for this year’s competition. The first place winner received a prize of $5,000, the second place winner received a prize of $3,000, and the third place winner received a prize of $1,000. A subcommittee of the Legal Education Committee judged the papers, the members of which were Gerry Beyer, Stephen Lind, Kevin Millard, and Skip Fox. The Legal Education Committee received 17 submissions this year. The 2005 competition has already started. Details of the 2005 competition can be found on the ACTEC website.
            Reflecting back on my law school experience, I am content in acknowledging there were many complex and challenging areas of the law school curriculum. The parole evidence rule, the exclusion of hearsay evidence and its exceptions, implied conditions of survival in trust construction, and partnership taxation, to name just a few, come to mind. But perhaps no other doctrine of law has rubbed law students, lawyers, and law professors the way the Rule Against Perpetuities [hereinafter RAP or Rule] has. The RAP is one of the most challenging aspects of the common law and the law school curriculum.[1] One commentator noted that the Rule is defined briefly and deceptively.[2] The traditional RAP, which limits the length of time a property owner can control the use of her property, is typically defined as follows: “No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.”[3] With all of this talk of vesting, interests, and lives in being, it is no wonder law students cringe when its name is mentioned. As a law student, I and many—if not most—of my fellow students, learned just enough to be able to apply it on the final exam and then forget it forever.[4] Few practitioners actually work with the Rule, fewer yet work with the Rule on a regular basis, and an even smaller minority of practitioners feel confident in their abilities to work around the Rule’s confines.[5] Law professors are moving away from teaching the RAP[6] for many reasons, including: (1) they may not be that comfortable with the RAP themselves; (2) its lack of sex appeal in comparison to other property law subjects, keeping in mind that law professors face grade evaluations at the end of the semester;[7] (3) the RAP is tested on the bar exam less these days; and (4) few students will ever have to tackle the intricacies of the Rule.[8]
Fewer students and practitioners will have to face the wrath of the Rule because a trend has developed to do “[w]hat was once unthinkable,”[9] repeal the RAP.[10] “How did a rule that began with the 1682 Duke of Norfolk’s Case . . . and endured for three centuries into the reaffirming 1983 Restatement (Second) of Property and the 1986 USRAP, suddenly become questioned?”[11] State legislatures are not just repealing the RAP, some are enacting laws that favor perpetual trusts in other ways. South Dakota is one example of such a state. South Dakota not only repealed the RAP, but enacted laws that provide for no state income or capital gains tax on trust income, a high level of protection from beneficiary creditors, and a high level of confidentiality.[12] Why has repeal of the RAP become so popular?[13] I explore possible reasons for this trend below. My intent, however, is not to decide whether or not repeal is the proper alterative to the common law RAP. Nor is my goal to teach the intricacies of the Rule; I leave that to the dying number of law school professors who actually teach the Rule. In this article, I lay out the modern policy arguments cast for and against repeal of the RAP. I leave it to you to decide whether or not the current trend is a step in the right direction—that is, whether or not the modern policy arguments in support of keeping the RAP are justified. I only ask that in making this determination you ask yourself whether New York having a RAP matters if New Jersey does not. That is, whether the modern justifications for the RAP, whatever they may be, are being realized when a settlor who is determined to tie up his property for eternity can circumvent the RAP by setting up a New Jersey trust. At the very least, by the end of our journey you will have a resource that lays out all the arguments cast for and against repeal of the RAP that you can consult when the RAP is taught in law school, debated in bar committees and state legislatures, or discussed at cocktail parties.
Part II of this article discusses the roots of the RAP. This Part will examine the legendary case that birthed the RAP and other case law that helped hammer out its details. Part III discusses the original justifications for the RAP. Parts IV and V represent the crux of this article. Part IV will discuss the factors that have led to the recent repeal movement and present the modern justifications for repealing the RAP. Part V examines the modern justifications for maintaining some form of RAP. Finally, Part VI will discuss the race to the bottom in the context of repeal of the RAP and the federal government’s role—at least future role it may be forced into. This Part will explore whether—even if you believe the RAP has important modern social and economic justifications, including prevention of dead control and adverse wealth accumulation—this is a policy decision better left for the federal government (likely in the form of some sort of “beefed up” generation-skipping transfer tax).
The RAP has its roots in early English common law, in a 1682 opinion crafted by Lord Nottingham—The Duke of Norfolk’s Case.[14] In this case, Henry Frederick Howard, a member of one of the most prominent families in England and Earl of Arundel and Surrey, was faced with trying to figure out how to provide for his youngest son.[15] The problem stemmed from the fact that Mr. Howard’s eldest son, Thomas, was insane.[16] Under English law, however, his eldest son was entitled to succeed to his wealth, which consisted basically of real property.[17] Mr. Howard, through his attorney, Sir Orlando Bridgman, attempted to devise a way in which he could provide for his youngest son at the expense of his eldest son.[18] The two chose to accomplish this through the use of a trust instrument, which “became the basis for the celebrated legal battle between” the two sons.[19] The issue in The Duke of Norfolk’s Case was deceivingly simple: Which of the two brothers was entitled to the property in question?[20] The case, however, became infamous as the first to provide a foundation for the common law RAP.[21]
The common understanding among law students,[22] practitioners,[23] and law professors[24] appears to be that the rule announced in The Duke of Norfolk’s Case was intended to limit “dead hand control” and promote the “free alienability of property.” This view proclaims: “A rule favoring alienability was necessary by the end of the seventeenth century because ‘perpetuities impeded the development of the mercantile middle class by taking property out of the stream of commerce.’”[25] It was thought the landed gentry class sought to convey land with restrictions to their heirs, hoping to prevent the land from being sold outside the family.[26] That is, because Lord Nottingham’s opinion limited the length of time Mr. Howard could control the use of his property, it was a victory for society’s living members and a blow to those hoping to control their property indefinitely. However, at least one commentator has challenged this once common understanding of the case.[27] The struggle in a larger sense was originally between the conveyancers and the royal judges, not necessarily these two brothers.[28] The conveyancers wanted more freedom to control who received their property, while the royal judges stood firmly against this.[29] George Haskins asserts that it was actually the conveyancers who were ultimately victorious.[30] That is, the common understanding is that Mr. Howard’s control was curbed, but in actuality, Haskins asserts, it was settlors like Mr. Howard who were benefited by the rule laid down in The Duke of Norfolk’s Case. “The rule meant that what had once been considered a perpetuity was no longer.”[31] The law providing the eldest son automatic succession to property had been replaced with a rule of law that allowed testators more control as to the disposition of their property. “This conclusion . . . is contrary to traditional assumptions about the origins and purposes of the [R]ule . . . .”[32] In other words, Lord Nottingham’s opinion actually extended dead hand control and made land less marketable. “In this sense the new [R]ule was a clear victory for the ‘dead hand,’ not for free alienability. The rule served the fathers, not the sons . . . .”[33] In the end, however, the case is important for only one reason: It laid the foundation for what we have come to know (and fear) as the common law RAP.
Although The Duke of Norfolk’s Case provided a foundation for the common law RAP, it did not provide for all of its intricacies.[34] Subsequent case law helped to refine the rule laid down in The Duke of Norfolk’s Case into what we now know to be the common law RAP. For example, in Low v. Burron,[35] where vesting was contingent upon the termination of three lives, the court rationalized that it was only one life that was actually important.[36] Moreover, in Thellusson v. Woodford,[37] “it was determined that the lives in being which are the measure of the period of vesting need not be persons who take anything under the terms of the instrument.”[38] The issue continued to loom, however, as to the length of the limitation period.[39] It was not until 1833, in Caldell v. Palmer,[40] that the twenty-one year limitation was placed upon the creation of future interests.[41] The combination of the above case law produced what we now know to be the common law RAP. The original justifications for imposing such a limit on a testator’s control of their own property are examined below.
III. Original Justifications for the RAP
What was Lord Nottingham worried about that caused him to establish such a rule? As noted above, the common understanding is that he was worried about beneficiaries being able to sell real property—that is, the unfettered ability to alienate land.[42] The reasoning usually goes as follows: If a settlor carves out future interests in land, interests that are less than a fee simple, the beneficiaries will have a harder time disposing of the property because few will be willing to buy a piece of property with less than full ownership rights.[43] Thus, the RAP was first developed in The Duke of Norfolk’s Case “to foster the alienation of land, that is, the transfer of full ownership in land in fee simple absolute.”[44]
Commentators have articulated a number of other justifications for the establishment of the RAP—justifications I classify here under the heading “original justifications” because they were announced some time ago. Along the same lines of providing beneficiaries with the ability to alienate the land, it is also believed the RAP was originally established “to prevent the exclusion of property from the channels of commercial development for extended periods of time.”[45] These restrictions had adverse economic consequences. Buyers were unwilling to purchase rights to property that would not allow them to develop the property the way they saw fit. Thus, “the rule block[ed] these undesirable economic consequences by invalidating the interests that could vest after the perpetuities period has run.”[46] It is important to note, as will be developed more fully below, that the RAP was developed at a time in history when wealth was tied up almost exclusively in land.[47] It was recognized that restraints on alienation would not only affect the marketability of land, “but could also result in violent revolutions caused by land hunger among peasants and the presence of a subservient serf class.”[48]
It was also argued that it was “against the interests of society to allow unrestrained ‘dead hand control’ of property.”[49] That is, English courts did not want someone buried six feet under deciding how property was to be used hundreds of years after their death. Allowing perpetuities would sanction the grip of the dead hand at the expense of taking control from society’s living members, the group that is currently making use of the property.[50] In short, changing times would demand flexibility,[51] and allowing settlors to control the use of property indefinitely would harm society.
Another often cited original social justification for the RAP was that “settlors may wish to use trusts to maintain ownership of property and other forms of wealth within a single family for longer periods of time.”[52] In other words, the concentration of wealth in the hands of a few was thought to be detrimental to society at large. “While everyone may enjoy equality under the law, not everyone would enjoy economic equality.”[53]
The final original justification for the RAP was that it served to referee competing interests. It was thought that the RAP was a proper “balance of competing interests.” That is, the RAP properly balanced the interests of the testator and the living beneficiaries.[54]
A. Simplification, Please!
“No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.”[55] What? ¿Me dispensa? Me pardonne? Che ciò era? That sure did not sound like English to me. One of the reasons the RAP has been on the chopping-block in recent years is that it is said to be too complicated, and thus a trap for practitioners.[56] In fact, in Lucas v. Hamm,[57] the court opted not to hold a drafting attorney liable for malpractice when the testator’s intentions were frustrated due to violation of the Rule.[58] The court reasoned that because the Rule is such a “technicality-ridden nightmare,” it would be improper to hold that the ordinarily prudent attorney would not have violated the Rule.[59] In other words, “a perpetuities violation is too understandable and easy to make to qualify as professional malpractice.”[60] The problem with this holding is, of course, that because the RAP is so complicated and beneficiaries have no recourse against the drafting attorney, testators are left with their desires unfulfilled and no available recourse.[61]
Why is the RAP so complicated and difficult to apply?[62] The elements that make up the RAP are not simple to define, let alone grasp. As stated above, my intent is not to provide a framework for applying the RAP, however, I will highlight some of the difficulties in the RAP’s application.[63] For example, the RAP only applies to certain future interests.[64] Thus, the concept of “future interest” must be defined. Moreover, the test is premised on “any possibility,” no matter how remote.[65] That is, under the common law RAP, courts do not wait and see if the interest actually vests within the perpetuity period. If there is any possibility that the interest could vest beyond this period it is void—despite the actual outcome. Furthermore, the RAP’s perpetuity period is measured in part by the infamous (and dreaded) “lives in being.” The only relevant lives for purposes of this test are those persons who can affect vesting of the interest. Thus, those persons who can affect vesting of the interest need to be segregated from those who cannot. The RAP requires that the interest vest or fail to vest within the perpetuities period. Consequently, in order to apply the RAP you need to distinguish between interests that have vested and those that are contingent on the happening of a future event. Finally, application of the RAP is complicated by the fact that the interest need not vest in possession, merely interest.[66]
In short, the perception has become that “the RAP is hard to understand, so why not just abolish it?”[67] I am not convinced, nor should you be, that the fact that the RAP is complicated should be, by itself, enough to support outright repeal. I acknowledge that it does not make the lives of law students, lawyers, law professors, and testators easy. Repeal advocates should, however, come forth with further justifications before we are satisfied that allowing testators to tie up property, perhaps all of their property, from here to the end of time is a good thing—or at least not all that bad. What else do repeal advocates have to offer?
B. The Rule Is Rigid and Mathematical
Another characteristic of the RAP that has advanced the repeal movement is that it is applied rigidly and mathematically.[68] The RAP, as stated above, is applied at the time the interest is created[69]—basically, by identifying the proper measuring lives, adding twenty-one years, and determining whether, from the terms of the trust instrument, there is any possibility that the interest may not vest within this period. If the future interest created violates the strict definition of the Rule, it is invalid.[70] This is so despite the fact that the interest created may “violate the letter of the Rule but not the spirit of the Rule.”[71] Moreover, rigid application has the reverse effect as well—“affirmation of interests that violate the spirit of the Rule simply because they have been crafted within the requirements of the letter of the Rule.”[72]
It is important to note that the RAP is a rule of law, rather than a rule of construction[73]—that is, the RAP applies regardless of what the testator’s intent actually was. This mechanical application of the Rule leads to some amazing and absurd holdings, which is yet another factor advancing the repeal movement.[74] An example of such a case is the often-cited Ward v. Van der Loeff,[75] where the validity of a testator’s codicil was contingent upon whether or not his parents could have anymore children.[76] The English court invalidated the codicil based upon the assumption that the testator’s parents, who were both sixty-seven years old when the testator died, could possibly have more children.[77] When is the last time you saw a sixty-seven year old mother? Well, I “Googled” the issue. It turns out that the world’s oldest mother, as of April 9, 2003, is a sixty-five year old from India (she had a boy).[78] Maybe this makes sense after all? No, I am quite certain it is still ridiculous. Professor Lynn has categorized other ridiculous outcomes under the RAP into six categories of cases: (1) The Case of the Fertile Octogenarian;[79] (2) The Case of the Unborn Widow;[80] (3) The Case of the Administration Contingency;[81] (4) The Case of the Precocious Toddler;[82] (5) The Case of the Fertile Decedent;[83] and (6) The Case of the Fortuitous Adoption.[84] An analysis of these cases could prove entertaining, but the point can be made without frightful case analysis. THE POINT: Under this assumption-laden approach, “reasonable dispositions can be rendered invalid by . . . obscure possibilities [such as] a married person in his or her middle or late years later marrying a person born after the transfer or the probate of an estate taking more than 21 years to complete.”[85] Ward, and cases similar to it, have contributed to the current repeal movement because courts are forced to ignore unjust consequences, disregard actual events, and invalidate future interests entirely on the grounds of what might happen.
C. The Rule Is a Land-Based Artifact, Not Applicable to Today’s Society
The RAP was enacted at a time when wealth was strictly tied to land ownership. Today, little of our wealth is in land ownership. Rather, the bulk of our nation’s wealth is in nonrealty investments such as retirement accounts and trusts, which hold stocks, bonds, and other financial securities.[86] Thus, it is argued that “the original purpose the Rule was created to serve is outmoded.”[87] “The change in the emphasis of the Rule from one governing only interests in land to one governing all equitable interests seems to have developed over time without any realization that it included a change in the purpose and approach of the Rule.”[88] Why has this change in emphasis impacted RAP sentiments? Because the original stated objective of the Rule was to foster the free alienability of land. We as a society care if a dead guy tells us we cannot “mess up the face of downtown Waterbury, Connecticut.”[89] Who really cares if stock ownership is tied up for centuries? Those who own stock do not make corporate decisions; rather, the power lies in the board of directors.[90] Moreover, most trust documents today give the trustee the power of sale; as such, some have questioned whether this original justification for the RAP has any basis in today’s society.[91] For example, if a settlor establishes a trust with stocks, bonds, and the like, and provides future equitable interests for her beneficiaries, with the power to sell and reinvest any asset and proceeds at any time in the trustee, how has alienability of property been fettered?[92] “The corporate assets likely will reach their highest and best use even if owned by the trustee of a perpetual trust.”[93] Furthermore, trust beneficiaries are often given “ownership” akin to fee ownership[94] and therefore the RAP is no longer needed. Regardless of your opinion, a consensus should be reached that the viability of the Rule should “be judged against the economic landscape of the twenty-first-century.”[95]
Other arguments are often tied into the “outdated” argument. For example, proponents of the RAP argue that the Rule is a sensible balance of competing interests[96]—that the RAP balances the wants and desires of the testator and succeeding beneficiaries. At least one commentator has noted that the only way the RAP could serve this supposed function is merely by chance.[97] That is, “the requirements of the Rule Against Perpetuities have absolutely no relationship, other than pure coincidence, to the factors involved in determining the balance between the interests of the testator and the beneficiaries.”[98] Recall that to determine whether the RAP applies to a future interest, a determination must be made as to whether the interest is “vested,” “contingent,” or an “executory” interest. If the determination as to whether an interest is vested, contingent, or executory, and thus not subject or subject to the RAP, can be determined by where one places a comma in trust language, how does this balance the interests of the respective generations?[99] Take, for example, the following bequest: Income to A for life, then to A’s children if they survive to age 30. The gift to A’s children violates the RAP because it may or may not vest within the 21 year period. As such, a court would strike out the language after the comma, and the remainder would go to A’s estate—which may not necessarily include simply A’s children at this point. On the other hand, placing the comma after the gift, that is, not placing the condition within the gift itself, provides for a different outcome. For example: To A for life, then to A’s children, but if A’s children do not attain the age of 30, to B. But you said you were not teaching the RAP! I am not, I promise. Bear with me. The gift to A’s children would violate the RAP, for the reasons stated above. A court would strike the language after the comma, that is the condition, but A’s children would receive their gift. If this were the outcome, it could be said there is a balance of competing interests. However, as Professor Begleiter points out, this is really only accomplished by chance—where the drafter places the comma.[100] If an interest is struck down for violating the RAP, and the taker depends on where the drafter places the comma, how is this a sensible balance of competing interests? It is not. At the very least it is not a sensible balance; rather, it represents coincidental balancing. The “vesting of an interest . . . [has] nothing to do with when future generations should have unfettered control of property.”[101]
A final argument, which evidences the RAP’s inapplicability to the current state of events, is that the Rule prohibits the accomplishment of common dispositive desires.[102] Testators desire to be able to provide for their grandchildren, however, many “have question[ed] the competency of a 21-year-old and would like to postpone total control over large amounts until [they are] 25 or 30.”[103] Testators are not able to delay the “vesting” of an interest, however, until their grandchildren reach these more mature ages without violating the common law RAP. Therefore, natural and judicious desires are unable to be accomplished within the limitations of the common law RAP, thus propelling the modern repeal movement.
Some state legislatures have opted for repeal in the hope of attracting trust business to their states.[104] South Dakota and Alaska are examples of such states.[105] With the recent downturn in the economy, states are starving for economic activity[106] and have sanctioned repeal of the RAP as one mechanism for meeting their respective economic needs. Abolishment of the RAP generates trust business in repealing jurisdictions and resources for the state through increased tax revenues.[107] One would assume the businesses in states whose trust business is being swept out from under their feet would be concerned. However, creditors and bankers from these states do not appear to be putting up much of a fight. In fact, they appear disorganized or at least serene in the current state of affairs.[108] This nonchalant attitude has led one commentator to note: “The sanctioning of perpetual trusts by some states . . . is the most obvious form that non-caring-about-perpetuities is taking.”[109] So, businesses and creditors are asleep, but what about state legislatures? They are supposed to be looking out for our best interests, right? It appears society’s guardians are asleep at the gatehouse as well.[110] Thus, the businesses and creditors affected do not care, the state legislatures do not appear to care, but what about the general population?
E. Shift in Attitudes: Trusts and Perpetuities Are Everywhere, and After All, We Like Rich People Today
One explanation for the advancing repeal movement is the general shift in Americans’ attitudes since the RAP’s enactment.[111] What is responsible for this change in attitude? First, perpetuities are everywhere in today’s society.[112] For instance, corporations, charities, pension trusts, nonprofit foundations, and the like are more popular than ever.[113] This constant exposure to perpetuities may be leading citizens, and their respective legislatures, to the subconscious belief that the longer something lasts the better.[114] Second, it can be argued that today we approve of the rich and strive to be like them.[115] Has economic equality lost its appeal? Do we not distrust the filthy rich anymore? Perhaps there has been little blood shed in repealing jurisdictions because “[w]e identify with the rich . . . and admire the successful “‘capitalist and . . . entrepreneur.’”[116] That is, we believe that one day we too will be rich. We love shows like Lifestyles of the Rich and Famous, MTV Cribs, Joe Millionaire, and Who Wants to Be a Millionaire? Few would argue that the media’s role has been passive in this change of events. The rich have excellent public relations, which portray wealth in an “appealing light . . . [and] keep unattractive stories out of the news.”[117] Moreover, the popularity of lotteries has only enhanced this reality.[118] In short, “[t]o the extent that the Rule Against Perpetuities is designed to keep wealth in check or to aid in wealth’s fragmentation, it is not seen as serving a central social purpose at this time.”[119] Third, there is a perceived need for trusts more today than at any other time.[120] At one time it was the general belief that trusts made beneficiaries lazy and unproductive members of society.[121] One commentator labeled this the “‘sissification’ of beneficiaries.”[122] Now trusts look like the perfect planning device for all. Perhaps this is just good marketing on the part of lawyers and bankers, or perhaps, as some have suggested, we have become a money-hungry society looking for any device that may promote growth in the long run.[123] Perhaps even more importantly, the middle class has responded. One commentator observed: “Middle-class people want trusts for many purposes, including Medicaid planning, ERISA planning, credit shelter planning, and splitting assets between second wives and children of first marriages. The middle class also sees advantages in quasi and psedu-trusts such as those in IRAs and Uniform Transfers to Minors Act accounts.”[124] This shift in attitudes has perpetuated (pardon the pun) the repeal movement.
F. Enactment of the Generation-Skipping Transfer Tax
The generation-skipping transfer (GST) tax,[125] which was enacted in 1976 and significantly enhanced in 1986, was designed to ensure that wealth is taxed once a generation.[126] Attorneys had manufactured devices allowing the first generation beneficiaries to reap the benefits of property for life, not pay estate taxes on the property upon their death, and allow the second generation full ownership rights without successive taxation.[127] The GST is a tax on the transfer of property to beneficiaries at least two generations below that of the transferor.[128] Because of the way the GST is structured, testators can use their GST exemption to tie up $1.5 million[129] tax free forever. However, the RAP, and its lives in being plus twenty-one year limit, severely restricts the potential advantages that could arise from such an exemption. Thus, it has been argued: “The principal reason for the movement to sidestep or repeal the Rule Against Perpetuities is to enable wealthy individuals to create perpetual dynasty trusts that avoid the generation-skipping transfer (GST) tax system.”[130] Perhaps another reason for repeal is that the GST properly addresses most of the same concerns that the RAP addresses. That is, the GST acts to curve wealth accumulation, limit dead hand control, etc., through adverse tax consequences for tying up property for generations. Why do we need both?[131] Keep in mind that the GST tax has been “repealed.”[132] Well, not exactly.[133] In reality, there will be no generation-skipping transfer taxes imposed on generation-skipping transfers made after December 31, 2009, but before January 1, 2011 (i.e., during 2010 alone).[134] Regardless, repeal of the GST makes this argument (that there are other vehicles for achieving the results of the RAP) less practical.
For centuries, the importance of placing restrictions on the unfettered control of property has been recognized by the courts and state legislatures.[135] As noted above, however, there has recently been a repeal movement sweeping the country. There are states that are still holding out. What modern policy arguments are RAP proponents able to condor up to convince state legislatures that repeal is not the best solution? Those in favor of retaining at least some form of the RAP make many of the same arguments that were made when the Rule was first enacted. The RAP, proponents argue, is a sensible balance of competing interests.[136] Testators wish to dispose of the property as they see fit, while succeeding generations want to be able to use the property on their own terms and dispose of it the way they wish upon their own death.[137] Proponents of the RAP argue that in order “to come most nearly to satisfying the desires of peoples of all generations, we must strike a fair balance between unrestricted testamentary disposition of property by the present generation and unrestricted disposition by future generations.”[138] This could be classified as an alienability argument; however, not alienability for productivity.[139] Rather, the alienability I am referring to is the alienability that “enable[s] people to do what they please at death with the property which they enjoy in life.”[140] A famous law philosopher noted: “‘The far-reaching hand of a testator who would enforce his will on distant future generations destroys the liberty of other individuals and presumes to make rules for distant times.’”[141] If you believe that beneficiaries’ interests are important enough to limit “dead hand control,” is the common law RAP the right way to achieve this objective? The proper question, if you buy into this argument, is not whether we should retain the common law RAP, which no one can figure out; rather, the proper question is how long we should allow settlors to tie up their property.
A second and classical social policy justification for retention of the RAP is the “dead hand” control argument. Professor Simes aptly stated: “It is socially desirable that the wealth of the world be controlled by its living members and not by the dead.”[142] The world belongs to the living, not those buried six feet under. How does “dead hand control” affect the living? Principally, the effect of dead hand control is mostly economical. It has been argued that unfettered control of property by testators, placed in a trust instrument, is bad for society’s living members because “a trustee cannot invest the fund as freely as a person who owns it [outright].”[143] Opponents of the RAP argue that, although this may once have been a valid justification for the Rule, most wealth today lies in trusts and the like, where the trustee has the power of sale, and thus the fear of “dead hand” control is diluted.[144] This argument is probably overly relied on as a justification for repealing the RAP. Recall Professor Simes statement above: “I doubt he had in mind control over wealth by society’s corporate trustees.”[145] After all, even though alienability of property may no longer be considered a problem, a testator is still able to tie up property for long periods of time.[146] If a trust is of unlimited duration, “one can envision a situation arising in which the trust would encourage its beneficiaries to achieve goals that were set many, perhaps hundreds, years prior and that are no longer desirable for the beneficiary or in the best interests of society.”[147] Devoid of some emergency, the trustee is not going to be compelled to exercise this power of sale.[148]
It is also argued that repeal is bad for the economy: “It removes property from the rough and tumble efficiencies of the free marketplace, depositing it for perpetuity in the hands of overly conservative corporate trust officers.”[149] Trustees are by their nature conservative investors.[150] Trustees are not able to take “substantial” risks and “as a result, they often make less than productive investments.”[151] Moreover, even if the trustee is given a power of sale, and later exercises this power to sell certain trust assets, any proceeds from the sale will be brought back into the trust estate and controlled by its provisions—thus, the power of sale does nothing “to alleviate the tying up of wealth afforded by the dynasty trust.”[152]
Thirdly, the RAP aids in the optimal use of wealth in society.[153] This is said to occur because the holder of a present interest does not have to fret over the possible loss of her investment due to some outstanding future interest.[154] Thus, full development and use of the property is encouraged.[155] The RAP also contributes to the optimal use of wealth because it prohibits future interests that could hinder the sale of property for long periods of time.[156] It is thought that by removing these barriers, the property will find its way into the hands of someone who finds at least a direction for its utilization;[157] but, hopefully it is continually sold until the optimal use of the property is discovered.
The RAP also aids in keeping property responsive to the needs of its current owners.[158] For instance, the purchasing power of a separate interest in property (less than fee ownership) is less than the wealth represented by the whole of the underlying asset.[159] To the extent of this diminution, “the responsiveness of these assets to the needs of their current owners is diminished.”[160] RAP proponents argue that by regulating this potential diminution in value, the RAP aids in keeping property responsive to the needs of its current owners. Moreover, when property is tied up indefinitely it is unable to meet unexpected contingencies that may arise.[161] Repeal advocates note that the power of sale in the trustee, and the fact that most wealth is now in securities as opposed to land, lessens the need for the RAP—i.e., the alienability argument no longer holds water. Another way to look at this situation, however, is that a testator is hoping to commit certain resources to a stated end for perhaps the rest of existence. Proponents of the RAP argue that, for this reason, the function of the RAP “has broadened to include the prevention of limitations which ‘freeze’ or ‘tie up’ or ‘fetter’ property for too long a time, even though no specific thing has been made inalienable, even for a moment.”[162] The counter to this argument is that if the restrictions imposed are that appalling, a court of equity can reform the trust to meet the changing times. Thus, this argument for retaining the RAP is not very satisfying.
There is another social justification for retaining the RAP—an argument that is made perhaps more subconsciously. Recently, proponents of the RAP, maybe out of pure desperation, have argued that the RAP motivates younger generations to succeed.[163] The thinking is that if beneficiaries are not left huge sums of money, they will be motivated to seek success and wealth themselves, thereby making them more productive members of society. I can appreciate this argument, as I have witnessed this on many different occasions during my own life. However, those arguing it is time to repeal the RAP would counter, understandably, that this is wealth someone earned through hard work during their life. Why should they not be able to do what they want with it, even if that includes making the lives of their worthless kids easier? It is their money, who are you to tell them how they can use it?
B. Other Rationales
Recently, proponents of the RAP have attempted to slow the repeal movement by demonstrating the unsettlings that would occur if the RAP were repealed and dynasty trusts were allowed to exist in perpetuity.[164] For example, Professor Bloom argues that the reality is a perpetuity could really, really become a “perpetuity.”[165] Imagine a settlor like Bill Gates leaving his money in trust for eternity. What is eternity? Professor Bloom points to the world of astrophysics, and notes that human life could last here on earth for “somewhat more than 1 billion years.”[166] Imagine Bill Gates tying up his fortune for this period of time. Moreover, commentators have pointed to the “administrative nightmare” that could transpire if repeal is realized.[167] Professor Waggoner cites the potential chaos and cost of these dynasty trusts as reasons for retaining the RAP:
Government statistics indicate that the average married couple has 2.1 children. Under this assumption, the average settlor will have more than 100 descendants (who are beneficiaries of the trust) 150 years after the trust is created, around 2,500 beneficiaries 250 years after the trust is created, and 45,000 beneficiaries 350 years after the trust is created. Five hundred years after the trust is created, the number of living beneficiaries could rise to an astounding 3.4 million.[168]
Do you see the potential problem? Imagine the Bill Gates trust that could last until the end of time—over 1 billion years. Professor Begleiter has noted that the solution may be to require that these potential beneficiaries keep the trustee informed yearly as to their location and the like, so as to ease this potentially unbearable “administrative burden.”[169] This really is not a sensible solution. Is receiving 3.4 million pieces of mail to keep the trustee properly informed as to their location on a yearly basis any more convenient? Imagine the staff it would require and resources that would need to be consumed to handle this one trust. Perhaps in the future technology will provide a means of lessening this potential administrative nightmare.
Commentators have also pointed to the potential “problem” of mass accumulation of wealth over a trust’s perpetual existence as another reason to retain the Rule.[170] The exponential potential of these dynasty trusts is staggering when one considers the run of the stock market during the 1990s, while recognizing the sobering effect of the recent “recession.”[171] Professor Bloom notes that no one can predict the future,[172] but recognizes that the potential for growth in these dynasty trusts may prove to be yet another rationale for retaining the Rule: “[C]onsider the value of $1 million with an after-tax return of 6 percent for the following (relatively short) periods: Value after 100 years: $369 million; value after 200 years: $136.43 billion; value after 300 years: $50.395 trillion.”[173] It is said that repeal of the RAP could perpetuate the “adverse consequences of wealth accumulation.”[174] It is argued that by tying property up in perpetual trusts, beneficiaries are not able to consume the trust corpus as they see fit, and thus not able to spread this wealth.[175] This makes it “impossible for those born outside the umbrellas of inherited wealth to break into that chain of wealth.”[176] Accumulation of wealth leads us astray from our democratic roots. No longer will everyone be created equal. Rather, everyone will be created equal, except the beneficiaries of the rich.
As pointed out above, those in favor of repeal frequently argue that because the trustee has a power of sale, one of the historical purposes for the RAP—the prevention of dead hand control—is weakened. Some commentators have argued that placing control of society’s wealth in the hands of corporate trustees is not a sufficient answer to the dead hand control squabble.[177] Professor Bloom cites the drastic increase in the aggregate power in the hands of banks and trust companies “as one of the most serious consequences” of sanctioning perpetual trusts.[178] For example, “[f]rom 1990 through 1998, the value of equities held in bank personal trusts and estates grew from $190 billion to $538 billion.”[179] We have shifted from the dead hand wanting to control their assets indefinitely, to commentators arguing that banks should be able to control the assets indefinitely. Is letting either control assets indefinitely the right alterative? If most of the wealth currently lies in private pension plans, which is controlled mostly by financial institutions, how would repeal of the RAP significantly increase such control?[180]
Another argument, admittedly not convincing, put forward in support of retaining the Rule is that it is settled law upon which planners can rely.[181] I find myself unable to put much stock in this argument, but I note it here because I am attempting to put forth all the arguments. The problem with this argument is that planners—at least a large percentage of them—cannot figure the Rule out, thus planning is compromised because of the way the Rule itself works.[182] Courts recognize the complexity of the Rule and have taken it into their own hands to devise ways around the Rule’s sometimes harsh consequences.[183] With courts reforming trusts when they do not like the outcome,[184] does this provide for more consistency in estate planning? Would not repeal of the RAP and settlors always having their intentions carried out provide for more consistency in planning?
It is also argued that repeal of the RAP would result in a “significant decrease in tax revenues.”[185] The thinking is that the RAP forces the corpus of a trust to be exposed once every ninety to one hundred years, at which time it would be exposed to estate taxes again. With the estate tax itself currently on track to be repealed, at least temporarily,[186] this argument becomes less credible. Also, keep in mind that if the RAP is repealed, the only weapon to address the above noted fears is the GST tax. An argument in favor of maintaining the RAP is that the GST imposes a minimal check on these reservations.[187] In fact, with the repeal of the GST tax, this minimal check will vanish completely. Regardless, this “minimal check” results from the $1.5 million GST exemption trust, which settlors would be able to control tax-free forever if the RAP is repealed. Moreover, transfers exceeding the $1.5 million exemption are only subject to one GST tax and one estate tax.[188] “These transfers continue to pass down to indefinite future generations and are never subject to an additional transfer tax.”[189] The RAP, it is argued, is needed to supplement and reinforce the fears the GST tax was enacted to address.
Professor Bloom has noted that with the exception of the State of Florida, “[i]n their haste to jump on the repeal bandwagon, no repealing state appears to have seriously considered the negative consequences of sanctioning GST exempt perpetual trusts.”[190] Why should they? With states consistently operating with insufficient revenues, repeal of the RAP is one way in which states can increase available funds. Recent federal tax policy, along with the downturn in economic conditions, has forced states to place their own economic interests in front of any over-arching theoretical social policy objectives. For example, the Economic Growth and Tax Relief Reconciliation Act of 2001 phases out the state death tax credit, which acts as a revenue sharing device between the federal and state governments.[191] The effect of this phase-out on state revenues could prove to be significant.[192] For example, the State of Iowa is projected to lose nearly $400 million over the next decade, while the State of Florida is projected to lose over $7 billion.[193] That’s right, $7,000,000,000. Moreover, the 2003 tax cut softened the double taxation of dividends, resulting in further adverse effects on state revenues.[194] The Center on Budget and Policy Priorities predicted that eliminating the double taxation of dividends would cost the states $4.5 billion in revenue.[195] How? In most states, state tax laws are tied to federal tax laws. Thus, lowering the tax rate on “qualified dividends” would mean that the states would also tax at lower rates and thus adversely impacting this source of revenue.[196] The federal government appears disinterested in the effect of its tax policy on state budgets. Is it not time for states to start thinking of their own economic survival? Maybe all state legislators should pick up a copy of Bill O’Reilly’s book Who’s Looking Out for You? RAP opponents argue that repealing the RAP would increase state revenues.
Still worried about the consequences of repealing the RAP? Perhaps the federal government is better situated to make the determination as to whether these consequences are justified. The federal government has already involved itself in the debate over dead hand control and the inalienability of property.[197] The GST tax was designed to ensure that wealth is taxed once a generation.[198] Moreover, “[w]hen Congress enacted the generation-skipping tax it looked to the effect of The Rule which limited the duration of trusts.”[199] “[T]he generation-skipping tax and The Rule have the same purpose: They seek to coerce property owners to arrange their affairs so that transfers of property will occur after their deaths.”[200] I acknowledge that the RAP may serve further objectives that are not effectively addressed by the GST. In fact, the GST has recently been “repealed” by Congress,[201] which may provide an even stronger justification for the need to retain some version of the RAP. However, Congress does not appear to be concerned with large accumulations of wealth and the tying up of property for generations. Why should states? In fact, if some states have a RAP and others do not, how are the justifications of the RAP being realized? Donald Trump will establish a trust in New Jersey,[202] not New York.[203] The RAP only truly affects “unsophisticated investors” and is a trap for their attorneys. MY POINT: How are the justifications for the RAP being accomplished when you can simply create a trust in a state with no RAP? Perhaps the federal government is better situated to make this decision. In 1976, Congress decided that succession to wealth needed to be taxed each generation—whether that be for revenue purposes, progressivity purposes, or adverse concentration of wealth purposes. However, in 2001 Congress decided that the consequences of tying up wealth for generations are not sufficient reasons to justify a tax on generational transfer of wealth.
While it is true the RAP (i.e., property rights) has always been a state issue, the federal government has, however, made policy decisions in other areas of the law traditionally left to the states. For example, through the recently enacted No Child Left Behind Act, Congress is attempting to regulate education, which has traditionally been regulated at the local level. Congress determined that schools and students therein need to meet certain competency levels, and through its spending power, has forced states to comply. The age at which one may legally consume alcoholic beverages and the maximum blood alcohol limit has been traditionally left for states to decide based upon local societal norms. Recently, the federal government made its own policy determination that the maximum blood alcohol level for DUI offenses should be .08 and conditioned receipt of federal road construction funds on states lowering the blood alcohol limit from .10 to .08. The State of Iowa originally fought this policy, foregoing needed road construction funds. Recently Iowa caved in and accepted the policy decision made by Congress. Federal policy decisions like these are plentiful. The point is that Congress often makes policy decisions in areas of law that have traditionally been left for state regulation. If the consequences of repealing the RAP are sensible and justified, Congress could easily make this determination by enacting some sort of limitation on the tying up of property. This could take the form of a “beefed up” federal GST tax or a whole new tax that incorporates elements of the RAP and the GST.[204] Perhaps the new tax would be levied based upon the number of years a testator ties up property.[205] For example, a 20% tax could be levied on tying up property for 100 years, while a heavier tax, perhaps up to 50%, could be levied on tying up property for 500 or more years.
Commentator after commentator argues for or against repeal of the RAP. This is a debate that could endure indefinitely. I propose that if the RAP proponents are justified in their fears of the consequences of repeal, or justified in their stance that the RAP occupies an important societal role, the federal government would recognize this as it did in 1976 (and again in 1986) and reenact the GST tax or something akin to it—perhaps a tax that incorporates portions of the GST tax and the RAP. If the federal government is not worried about the adverse consequences associated with repeal of the GST, why should states be concerned with the adverse consequences of repealing the RAP? Random codification of the RAP by state legislatures does not solve any of the stated objectives of the RAP—it only hurts “unsophisticated investors” and serves as a trap for law students, professors, and practicing attorneys. In fact, I submit that the states should feel comfortable in repealing the RAP to protect their economic subsistence. Federal tax policy is often used to advance policy objectives and if the above fears are rational the federal government will act.[206]

[**] I would like to express my appreciation to Professor Martin D. Begleiter of Drake University Law School for his guidance and constructive criticism on earlier drafts of this article.
[1] See Paul G. Haskell, A Proposal for a Simple and Socially Effective Rule Against Perpetuities, 66 N.C. L. REV. 545, 545 (1987) (noting that the RAP “is one of the most complex and least understood areas of the common law”); George L. Haskins, Extending the Grasp of the Dead Hand: Reflections on the Origins of the Rule Against Perpetuities, 126 U. Pa. L. Rev. 19, 20 (1977) (noting that the RAP “is among the oldest, most respected, and difficult to understand rules of the common law”).
[2] Haskell, supra note 1, at 545.
[3] JOHN CHAPMAN GRAY, THE RULE AGAINST PERPETUITIES 191 (4th ed. 1942); see also Scoles et al., Problems and Materials on Decedents’ Estates and Trusts 1073 (6th ed. 2000) (citing Leach, Perpetuities in a Nutshell, 51 Harv. L. Rev. 638 (1938)). Note that under the common law RAP, this determination is made at the time of creation of the interest. Haskell, supra note 1, at 545. Thus, the “[q]uestion is not whether the interest in fact vests in interest within the time limit, but rather whether it is possible that it might vest in interest after the expiration of the time limit.” Id. That is, even if there is only a modest possibility that the interest would not vest within the proscribed time, the interest is voided. Martin D. Begleiter, To Repeal or Not: The Rule Against Perpetuities, 2002 Winter Counselor, at 24.
[4] Begleiter, supra note 3, at 24; see also In re Trust for Wold, 708 A.2d 787, 792 (N.J. Super. Ch. 1998) (noting that the common law RAP is “painfully committed to the memory by generations of law students”); John G. Shively, Note, The Death of the Life In Being—The Required Federal Response to State Abolition of the Rule Against Perpetuities, 78 Wash. U. L.Q. 371, 371 (2000) (noting that the RAP “has . . . been the bane of many a practicing lawyer, not to mention causing first year law students many sleepless nights”).
[5] Begleiter, supra note 3, at 24 (noting that most lawyers “have never encountered the rule in . . . practice and don’t know anyone who has”); see also Lucas v. Hamm, 364 P.2d 685, 690 (Cal. 1961) (failing to hold a lawyer liable for malpractice for violating the RAP because the Rule is such a “technicality-ridden nightmare” that it would not be proper to hold that the ordinarily prudent attorney would not have violated the Rule).
[6] See Joel C. Dobris, The Death of the Rule Against Perpetuities, or the RAP Has No Friends—An Essay, 35 Real Prop. Prob. & Tr. J. 601, 656 (2000) (noting that teaching of the RAP is at an all-time low).
[7] See id. (noting that “teaching sexy topics is so easy”). Dobris goes on to note the mutual “pack” between students and law professors to “hive off” boring aspects of the curriculum, which includes restraints on alienation. See id. Moreover, law students are treated like customers now days—and we all know that the customer has to be satisfied with their experience. See id. I doubt there has been any student satisfied after leaving their first RAP lesson.
[8] This is so because more states are opting for repeal. Please note, however, that the RAP is not a fictitious exercise for students of the law. It is a real law, which can produce real, and sometimes harsh, consequences. As one wills text noted: “The Rule Against Perpetuities is not to be looked upon as an archaic doctrine or as a mere exercise for law students. The Rule is of relatively modern vintage, and its relevance to present-day estates practice should not be underestimated.” Scoles et al., supra note 3, at 412.
[9] Id. at 1139; see also Robert J. Lynn, The Modern Rule Against Perpetuities 10 (1966) (opining that despite Simes’s fears, “it will be with us for a long, long time”).
[10] See Angela M. Vallario, Death by a Thousand Cuts: The Rule Against Perpetuities, 25 J. Legis. 141 (1999) (noting that a “recent trend has begun among jurisdictions to statutorily abolish the Rule for contingent interests in trusts with private beneficiaries”).
[11] Scoles et al., supra note 3, at 1139.
[12] Verner F. Chaffin, Georgia’s Proposed Dynasty Trust: Giving the Dead Hand Too Much Control, 35 Ga. L. Rev. 1, 1 (2000).
[13] See Begleiter, supra note 3, at 24 (noting that repeal of the RAP has become one of the “hottest and most controversial issues in current wills law”).
[14] The Duke of Norfolk’s Case, 3 Ch. Cas. 1, 22 Eng. Rep. 931 (1682); see also Haskins, supra note 1, at 20 (noting that The Duke of Norfolk’s Case is famous for first announcing the elements of the RAP). Note, however, that an attempt had been made earlier to restrict the creation of certain executory interests in Child v. Baylie. See Lewis M. Simes, Cases and Materials on the Law of Future Interests 534 (2d ed. 1951) (citing Child v. Baylie, Cro. Jac. 459, 79 Eng. Rep. 393 (1618)).
[15] Haskins, supra note 1, at 19.
[16] See id.
[17] Id.
[18] Id.
[19] Id.
[20] See id. at 20.
[21] See id.
[22] Shively, supra note 4, at 373-74 (noting that the RAP “only arose as a final step after years of conflict between courts, trying to maintain the alienability of property, and feudal lords, attempting to amass and control wealth over generations”).
[23] Haskins, supra note 1, at 20; see also Vallario, supra note 10, at 143 (noting that this case “was the first successful move by the royal judges to limit the dead hand control”).
[24] See, e.g., Simes, The Rule Against Perpetuities, 103 U. Pa. L. Rev. 707, 708 (1955); Begleiter, supra note 3, at 24 (noting that the RAP “originated to keep land marketable”).
[25] Haskins, supra note 1, at 20 (quoting Grimes, Runnymeade Revisited, 6 Val. U. L. Rev. 135, 136 (1972)); see also Vallario, supra note 10, at 143 (noting that wealthy land owners used future interests to realize their goal of controlling their property after death, that this restricted the alienability of land, and that the RAP was “a compromise between wealthy landowners who desire to keep land within the family and royal judges who tried to resists such efforts”).
[26] Keith L. Butler, Long Live the Dead Hand: A Case for Repeal of the Rule Against Perpetuities in Washington, 75 Wash. L. Rev. 1237, 1242-43 (2000); see also Shively, supra note 4, at 373-74 (noting the conflict between the courts, which tried to maintain the alienability of property, and the feudal lords, who attempted to amass and control wealth over generations).
[27] See Haskins, supra note 1, at 19.
[28] Id. at 21.
[29] Id. But see Jesse Dukeminier, Gilbert Law Summaries: Property 126 (15th ed. 2000) (stating that the lords were trying to “find means of keeping land in the family, the judges trying to curb the dynastic devices invented by lawyers for the lords”).
[30] Haskins, supra note 1, at 19.
[31] Id. at 46.
[32] Id. at 21.
[33] Id. at 46.
[34] See Vallario, supra note 10, at 143 (asserting that in The Duke of Norfolk’s Case, the court allowed “the settlor to control disposition of the property for a person’s lifetime”). Note that the rule laid down by the court in The Duke of Norfolk’s Case did not include the extra twenty-one year period—which was to appear for the first time in a subsequent case. See Begleiter, supra note 3, at 24; see also infra notes 35-41 and accompanying text.
[35] Low v. Burron, 3 P. Wms. 262, 24 Eng. Rep. 1055 (1734).
[36] Simes, supra note 14, at 538 (citing Low v. Burron, 3 P. Wms. at 262, 24 Eng. Rep. at 1055).
[37] Thellusson v. Woodford, 11 Ves. 112, 32 Eng. Rep. 1030 (1805).
[38] Simes, supra note 14, at 538 (citing Thellusson v. Woodford, 11 Ves. at 112, 32 Eng. Rep. at 1030).
[39] See id. (noting that Stephens v. Stephens, Cas. Temp. Talb. 228, 25 Eng. Rep. 751 (1736), held that “a limitation which might not vest until the termination of a life in being and the minority of a beneficiary was valid,” and Lloyd v. Carew, Prec. Ch. 72, 106, Show. P. C. 137, 24 Eng. Rep. 35, 1 Eng. Rep. 93 (1697), held that “a limitation is good which might not vest until the termination of lives in being and an additional period in gross of one year”).
[40] Caldell v. Palmer, 1 Cl. & F. 372, 6 Eng. Rep. 956 (1833).
[41] See Simes, supra note 14, at 538 (citing Caldell v. Palmer, 1 Cl. & F. at 372, 6 Eng. Repo. at 956).
[42] See Scoles et al., supra note 3, at 409 (citing The Duke of Norfolk’s Case, 3 Ch. Cas. 1, 22 Eng. Rep. 931 (1682)) (using language such as “where there is no inconvenience in the earth,” and when asked where he would draw the line, stating, when “any visible inconvenience doth appear”).
[43] See Ira Mark Bloom, The GST Tax Tail Is Killing the Rule Against Perpetuities, Tax Notes, Apr. 24, 2000, at 570 (noting that “[i]f one or more future estates in land were made contingent on some future event—for example, on an unborn person being born—the present alienation of the land would be prevented until that future contingency was resolved”); G. Graham Waite, Let’s Abolish the Rule Against Perpetuities, 21 Real Est. L.J. 93, 94 (1992) (noting that contingent interests in land have social costs because the “the sale of land is made more difficult,” in that “[w]hile waiting for the contingency to be resolved, the title to the land may be unmarketable without release of all contingent interests, which may be impossible to achieve”).
[44] Bloom, supra note 43, at 570; Waite, supra note 43, at 94; see also John Chipman Gray, Rule Against Perpetuities 1 (2d ed. 1906) (noting that the RAP “is often spoken of as aimed at restraints upon alienation”).
[45] Thomas L. Stover, Why Not Repeal the Rule Against Perpetuities?, 30 July Colo. Law. 58, 58 (2001).
[46] Butler, supra note 26, at 1245-46.
[47] See id. at 1243 (noting that “[t]he rule developed in an era when wealth, power, and social status were bound up intimately with land ownership”).
[48] Shively, supra note 4, at 371.
[49] Butler, supra note 26, at 1245-46; see also Shively, supra note 4, at 373 (noting that the RAP has “been the primary judicial restraint on the ‘dead hand’ since it was first formulated in 1682”).
[50] Lewis M. Simes, Public Policy and the Dead Hand 59 (1955). Lewis M. Simes observed: “It is socially desirable that the wealth of the world be controlled by its living members and not by the dead. I know of no better statement of that doctrine than the language of Thomas Jefferson, contained in a letter to James Madison, when he said: ‘The earth belongs always to the living generation. They may manage it then, and what proceeds from it, as they please during their usufruct.’”
[51] Butler, supra note 26, at 1240 (noting that allowing perpetuities would promote the “unproductive use of property”).
[52] Id.
[53] Id. at 1243 (citing Lewis Simes, The Policy Against Perpetuities, 103 U. Pa. L. Rev. 707, 727 (1955); Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice 12-36 (1994)).
[54] Simes, supra note 50, at 58-59.
[55] Gray, supra note 3, at 191.
[56] See Butler, supra note 26, at 1247 (noting that difficulty in apply the Rule has led to reform movements); W. Barton Leach, Perpetuities Legislation, Massachusetts Style, 67 Harv. L. Rev. 1349, 1349 (1954) (noting that the RAP “is a dangerous instrumentality in the hands of most members of the bar”); Shively, supra note 4, at 380 (noting that the complexity of the RAP “makes it a trap for practitioners”); Vallario, supra note 10, at 141-42 (noting that the “complexities of the Rule . . . initiated and resulted in the variations of reform”).
[57] Lucas v. Hamm, 364 P.2d 685 (Cal. 1961).
[58] See id.
[59] Id. at 690; see also Vallario, supra note 10, at 145 (noting that Professor Leach has referred to the Rule as a “‘technically-ridden nightmare’”).
[60] Butler, supra note 26, at 1247.
[61] See Vallario, supra note 10, at 141-42 (noting that violations of the Rule produce harsh consequences for clients).
[62] Thomas Stover has noted that “the Rule is vague, confusing, burdened by exceptions, and bears little relation to the modern trust and estate practice or the contemporary business or commercial world.” Stover, supra note 45, at 58.
[63] One commentator provided the following summary of the factors that make the RAP complex and that cause it to sometimes produce arbitrary results:
[T]he prospective application of the time limit of the Rule to the range of possible events; the elusive quality of the measuring lives necessary for validity; the distinction between the future interest that is contingent and the future interest that is vested, vested with enjoyment postponed, or vests subject to divestment; the “all-or-nothing” class gift rule, which provides that if the interest of any member of a class violates the Rule, the entire class gift is invalid; and the mechanical excision of the future interest that violates the Rule, causing a dispositive vacuum that is usually filled by a reversion.
Haskell, supra note 1, at 549.
[64] The RAP applies only to contingent remainders and executory interests, not vested remainders.
[65] See Butler, supra note 26, at 1247 (noting that the RAP is difficult to apply because it requires the ruling out of extremely remote possibilities).
[66] See Shively, supra note 4, at 379 (noting that the RAP is not applicable when an interest is vested, even if possession is delayed until a future date).
[67] Dobris, supra note 6, at 656.
[68] Shively, supra note 4, at 380 (noting the dissatisfaction that comes from the Rule being rigid and mathematical).
[69] Scoles et al., supra note 3, at 413 (citing J. Gray, The Rule Against Perpetuities (4th ed. 1942)) (noting that “at the moment of creation the interest must be absolutely certain either to vet or to fail according to the terms of the instrument within the permitted period, or the interest is destroyed”).
[70] See Begleiter, supra note 3, at 24 (“If there was any possibility, no matter how remote, that an interest would not vest within the period of the rule, the interest was void.”).
[71] Id.; see also Merchants Nat’l Bank v. Curtis, 97 A.2d 207, 211 (N.H. 1953) (noting that “[t]he rule is a technical one, difficult of application and is often enforced to frustrate testamentary intent although the policy of the rule may not require such enforcement in a particular case”); Leonard Levin & Michael Mulroney, The Rule Against Perpetuities and the Generation-Skipping Tax: Do We Need Both?, 35 Vill. L. Rev. 333, 334 (1990) (noting that dissatisfaction with the RAP stems “from the fact that, more often than not, the Rule invalidates interests which are not within its policy and exempts interests which are).
[72] Begleiter, supra note 3, at 24.
[73] Lynn, supra note 9, at 57; see also Begleiter, supra note 3, at 24 (noting that the RAP is “a rule of law, not a rule of presumption”).
[74] See Begleiter, supra note 3, at 25 (noting that the “remote possibility” rational of the Rule has led to outrageous decisions); Vallario, supra note 10, at 145 (noting that the absurd consequences of strict compliance have led many scholars and lawyers to call for reform movements); see also John Chipman Gray, The Rule Against Perpetuities 2 (2d ed. 1906) (noting that the RAP has “led to grave practical errors”).
[75] Ward v. Van der Loeff, 1924 App. Cas. 653.
[76] Butler, supra note 26, at 1238 (citing Ward v. Van der Loeff, 1924 App. Cas. at 653).
[77] Id. (citing Ward v. Van der Loeff, 1924 App. Cas. at 653).
[78] See BBC News, Indian ‘Is World’s Oldest Mother,’ (Apr. 9, 2003).
[79] Lynn, supra note 9, at 58 (citing Jee v. Audley, 1 Cox 324, 29 Eng. Rep. 1186 (Ch. 1787)).
[80] Id.
[81] Id.; see also Ryan v. Beshk, 170 N.E. 699 (Ill. 1930) (striking down a bequest because a will may be probated for decades).
[82] Lynn, supra note 9, at 58.
[83] Id.
[84] Id.
[85] John D. Moore, Student Work, The Uniform Statutory Rule Against Perpetuities: Taming the “Technically-Ridden Legal Nightmare”, 95 W. Va. L. Rev. 193, 194-95 (1992).
[86] See Begleiter, supra note 3, at 25; Dobris, supra note 6, at 635.
[87] Begleiter, supra note 3, at 25. Professor Begleiter goes on to provide: “But the fact that the original policy of the Rule is no longer applicable is not a sufficient reason to repeal the Rule . . . .” Id. Perhaps the focus should be on the Rule’s modern applicability. I would concede that if the original purpose of the Rule is no longer being served, but it currently has modern justifications, then an argument could be made for its retention. But if the Rule is no longer serving its original purpose, and currently has no modern justifications, perhaps we should consider repealing it.
[88] Shively, supra note 4, at 379; see also Levin & Mulroney, supra note 72, 343 (“It seems quite likely that the change in emphasis from a rule which limited the creation of excessive interests in a specific piece of real estate (which acted to inhibit the transferability of such property) to a rule which prevented the creation of remote interests for beneficiaries in a trust is one which developed incrementally without any overt realization that it represented a change in approach.”).
[89] Dobris, supra note 6, at 636; see also Colonial Trust Co. v. Brown, 135 A. 555 (1926) (noting that the trust’s restrictions are too strongly against the interests of the beneficiaries and the public welfare, particularly when the trust’s terms were meant to benefit no one).
[90] Dobris, supra note 6, at 638; see also Revised Model Business Corporation Act § 8.01 (noting that “[a]ll corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed by or under the direction of, its board of directors”).
[91] Haskell, supra note 1, at 548 (noting that the original purpose of the RAP was to promote the free alienability of land, and that this purpose remains relevant today with respect to land interests, “but not to dispositions of real property in trust with a power of sale in the trustee”).
[92] See id.
[93] Dobris, supra note 6, at 635.
[94] Id. at 628.
[95] Butler, supra note 26, at 1253.
[96] See Chaffin, supra note 12, at 22 (noting that repeal of the RAP would ruin this sensitive balance and allow “the present generation to do as it wishes with the property it owns, without regard for the wishes of succeeding generations, even those whom the settlor cannot know and see”); see also discussion infra Part V.A.
[97] See Begleiter, supra note 3, at 25.
[98] Id.
[99] See id.
[100] See id.
[101] See id. Professor Begleiter aptly notes that the argument is typically over the wrong issue—repeal or not. See id. His position is that vesting has nothing to do with “satisfying competing interests,” that the real question should be: “Where should the balance be struck and how long should a trust be allowed to last.” See id.
[102] Begleiter, supra note 3, at 25.
[103] Id.
[104] See Scoles et al., supra note 3, at 1139 (noting that “[s]everal states abolished the Rule Against Perpetuities as part of an effort to attract trust business by enhancing certain tax motivated benefits”); Bloom, supra note 43, at 571-72 (noting that states are repealing the RAP “to allow their residents to create GST exempt dynastic perpetual trusts in their home states so that trust and legal business will not leave the state and to attract new GST exempt trust business from other states”); Dobris, supra note 6, at 605 (noting that a main reason for the recent repeal movement is that some states are hungry for out-of-state trust business).
[105] See Begleiter, supra note 3, at 25.
[106] See Tye J. Klooster, Repeal of the Death Tax? Shoving Aside the Rhetoric to Determine the Consequences of the Economic Growth and Tax Relief Reconciliation Act of 2001, 51 Drake L. Rev. 633, 655-58 (2003) (citing Lynn Okamato, Iowa State Revenue Down Millions, The Des Moines Register, May 8, 2002, at 1A) (noting the $219 million shortfall in revenue for the State of Iowa and that this may cause the state to make more budget cuts, drain away its emergency fund, and even eliminate entire programs).
[107] See Vallario, supra note 10, at 161.
[108] See Dobris, supra note 6, at 605 (noting that there is “no opposition from disorganized out-of-state creditors and out-of-state banks that eventually may lose money or business”).
[109] Id.
[110] See id. at 655.
[111] See generally id. at 601.
[112] See id. at 606.
[113] See id. at 606-08. Dorbris further notes that “[l]awyers, accountants, and the upper-middle class are bombarded with articles about techniques for keeping pension and IRA benefits ‘going’ for at least a generation. Obviously, the idea is that the longer advantageous arrangements exist, the better.” Id. at 609.
[114] See id. “[W]e associate worth with perpetual existence. We seemingly embrace syllogisms of this sort: ‘The pension trust is my friend. Pension trusts are perpetuities. Ergo, perpetuities are my friend.’” Id. at 625.
[115] See id. at 614.
[116] Id.
[117] Id. at 617.
[118] Id. at 615-16.
[119] Id. at 623.
[120] See id. at 642.
[121] See id. at 630.
[122] Id.
[123] See id.
[124] Id. at 654.
[125] I.R.C. § 2601 (2000).
[126] Regis W. Campfield, Estate Planning and Drafting 223 (2d ed. 1995).
[127] See id.
[128] See id. at 221.
[129] See, e.g., In re Trust for Wold, 708 A.2d 787, 791 (N.J. Super. Ch. 1998) (noting that “one of the significant purposes of the Trust [created in 1944] scheme was that the Grantor was able to shelter the fund and its appreciation in value from his estate for estate tax purposes and to incorporate then permissible generation skipping features”). Note that that Economic Growth and Tax Relief Reconciliation Act of 2001 incorporates gradually increasing exemption amounts. See Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16 [hereinafter 2001 Tax Act], § 521(c), 115 Stat. 69 (2001) (to be codified at I.R.C. § 2631(a)). Before 2004, the exemption amount was $1 million, indexed for inflation. See id. Beginning in 2004 the exemption amount is tied to the estate tax’s applicable exclusion amount ($1.5 million in 2004), which increases in stages until 2009, where it is capped at $3.5 million. See id.
[130] Chaffin, supra note 12, at 3.
[131] See generally Levin & Mulroney, supra note 72, at 333. See also Butler, supra note 26, at 1250 (noting that other legal mechanisms, including transfer taxes, are aimed at achieving the same results).
[132] See 2001 Tax Act, § 501(b), 115 Stat. 69 (to be codified at I.R.C. § 2664).
[133] See Klooster, supra note 106, at 664 (noting that the 2001 Tax Act fails to do all it proclaims to do).
[134] 2001 Tax Act, § 501(b), 115 Stat. 69 (to be codified at I.R.C. § 2664).
[135] See Restatement of Property, introductory note to Div. IV § 2129 (1944).
[136] See id.; see also Lynn, supra note 9, at 10; Shively, supra note 4, at 378-79; Bloom, supra note 43, at 570.
[137] See Simes, supra note 50, at 58 (noting that one of the arguments in favor of retaining the RAP is that it strikes a fair balance between these two generations).
[138] Id.; see also Restatement of Property, introductory note to Div. IV § 2129 (1944) (providing that “[t]he maximum possible liberty for all is attainable only by means of substantial restrictions upon the actions of each”).
[139] Simes, supra note 50, at 59.
[140] Id.
[141] Id. (quoting 12 Modern Legal Philosophy Series 205 (1914)).
[142] Id.; see also Restatement of Property, introductory note to Div. IV § 2129 (1944) (noting that “the regulation of the fettering of property is socially desirable because it embodies one of the compromises prerequisite to the maintenance of a going society controlled primarily by its living members”). Professor Ira Mark Bloom, of the Albany Law School, points out that two of the leading perpetuities scholars, Professor Jesse Dukeminier and Professor Lawrence W. Waggoner, cite the need to “curb dead hand control” as a current justification for retaining the RAP. Bloom, supra note 43, at 571 (citing Jesse Dukeminier, Perpetuities: The Measuring Lives, 85 Colum. L. Rev. 1648, 1710 (1985); Lawrence W. Waggoner, Perpetuities: A Perspective on Wait-and-See, 85 Colum. L. Rev. 1714, 1714 (1985)).
[143] Simes, supra note 50, at 60. Note, however, that the Uniform Prudent Investor Act (UPIA) may have changed this once stated rationale for retaining the RAP. That is, the (UPIA) arguably allows trustees to be more risky in their investment strategy than under the common law. However, a case can still be made that an outright owner could take on more risk, thereby leveraging her investment. This, of course, may not always be a good thing.
[144] See Shively, supra note 4, at 392.
[145] Bloom, supra note 43, at 575.
[146] See Vallario, supra note 10, at 154 (“The trustee’s ability to sell trust assets resolves the concern of inalienability. However, dead hand control is a valid concern and should not be overlooked.”).
[147] See id.
[148] See Bloom, supra note 43, at 574 (noting “trust termination cannot be compelled absent some emergency”); Vallario, supra note 10, at 154-55 (noting that abolishment legislation typically requires that the trustee have a power of sale, but notes that “the ability to sell trust assets or the discretion to terminate does not mandate the trustee do so, even if the failure to do so is not beneficial for the trust beneficiaries”).
[149] Stover, supra note 45, at 59; see also Vallario, supra note 10, at 154 (noting that dead hand control “hinders the marketability of property”).
[150] See, e.g., In re Dickinson, 25 N.E. 99 (Mass. 1890); St. Louis Trust Co. v. Toberman, 140 S.W.2d 68 (Mo. App. 1940); Comm. Trust Co. v. Barnard, 142 A.2d 865 (N.J. 1958); see also Haskell, supra note 1, at 548 (noting that a trustee is required by law to invest conservatively). In In re Dickinson, The Massachusetts Supreme Court reasoned:
A prudent man possessed of considerable wealth, in investing a small part of his property, may wisely enough take risks which a trustee would not be justified in taking. A trustee, whose duty is to keep the trust fund safely invested in productive property, ought not to hazard the safety of the property under any temptation to make extraordinary profits. Our cases, however, show that trustees in this Commonwealth are permitted to invest portions of trust funds in dividend paying stocks and interest bearing bonds of private business corporations, when the corporations have acquired, by reason of the amount of their property, and the prudent management of their affairs, such a reputation that cautious and intelligent persons commonly invest them own money in such stocks and bonds as permanent investments.
In re Dickinson, 25 N.E. at 100 (emphasis added). Similarly, the court in Toberman noted:
.A trustee . . . may take only such risks as an ordinarily prudent man would take in the investment of the funds of others, bearing in mind that it is the preservation of the estate, and not an accumulation to it, which is the chief object and purpose of his trusteeship.
St. Louis Union Trust Co. v. Toberman, 140 S.W.2d at 72. The court in Barnard reasoned: “The primary purpose of a trustee should be to preserve the trust estate, while receiving a reasonable amount of income, rather than to take risks for the purpose of increasing the principal or income. In other words, a trustee must be not merely careful and skillful but also cautious.” Comm. Trust Co. v. Barnard, 142 A.2d at 865 (citing 2 Scott on Trusts § 227.3, at 1203 (1939)). It could be and is argued that the recently promulgated Prudent Investor Rule (or Uniform Prudent Investor Act) has changed the investment limitations placed on trustees. For example, under the Uniform Prudent Investor Act, no investment is prohibited per se—the investment is judged from the context of risk of the portfolio as a whole, as opposed to the risk of an individual investment. However, the “black letter” of the Prudent Investor Rule still emphasizes caution. See Scoles et al., supra note 3, at 944 (noting that “[t]he black letter of the section goes on to explain that this standard ‘requires the exercise of reasonable care, skill and caution, and is to be applied to investments not in isolation but in the context of the trust portfolio and as a part of an overall investment strategy.’”) (emphasis added). So, while the Prudent Investor Rule allows trustees to be far less cautious than the Prudent Man Rule noted in the cases outlined above, the trustee must still be more cautious than a beneficiary has to be with her own money—the beneficiary could do what she wants with her own money without the “cautious” restriction that is still placed upon trustees.
[151] Chaffin, supra note 12, at 23.
[152] Id.
[153] See Restatement of Property, introductory note to Div. IV § 2129 (1944).
[154] See id.
[155] See id.
[156] See id.
[157] See id.; see also Shively, supra note 4, at 379 (noting that RAP proponents argue that the Rule promotes the free flow of wealth in society).
[158] See Restatement of Property, introductory note to Div. IV § 2129 (1944); see also Chaffin, supra note 12, at 22 (noting that “[p]roperty should be available to meet the needs of the living generation, and its current successive owners”).
[159] Restatement of Property, introductory note to Div. IV § 2129 (1944).
[160] Id.; see also Vallario, supra note 10, at 154 (noting that dead hand control hinders the ability of the “current equitable owners and prospective purchasers to engage in a transaction that could make them both better off”).
[161] Restatement of Property, introductory note to Div. IV § 2129 (1944).
[162] Id.
[163] Stover, supra note 45, at 59.
[164] See, e.g., Bloom, supra note 43, at 574.
[165] See id.
[166] Id.
[167] See id.
[168] See id. (citing Lawrence W. Wagoner, Director of Research of the Joint Editorial Board for the Uniform Probate Code, Press Release, available at
[169] See Begleiter, supra note 3, at 25 (noting that “this problem can be corrected by a simple requirement in the trust instrument that, in order to be eligible for a distribution, a beneficiary would be required to notify the trustee of the names and addresses of himself and his family yearly”).
[170] See Bloom, supra note 43, at 575.
[171] See id.
[172] Professor Burton Malkiel has suggested that monkeys throwing darts at a newspaper’s financial pages could do just as good a job picking stocks as so-called “experts.” See generally Burton Gordon Malkiel, A Random Walk Down Wall Street: Including a Life-Cycle Guide to Personal Investing (rev. ed. 1999). This is traditionally known as the efficient market hypothesis, and, in fact, this hypothetical is being tested in the Wall Street Journal’s Investment Dartboard Contest. See Tye J. Klooster, Do Money Managers Have Stock Selection Skill? An Analysis of the Investment Dartboard Contest, Unpublished Manuscript (on file with author).
[173] Bloom, supra note 43, at 574.
[174] See Vallario, supra note 10, at 155-56. There is debate as to whether or not accumulation of wealth can ever by “adverse.” You can find economists arguing that accumulation of wealth is a good thing, and those that argue accumulation of wealth is bad for society. See Klooster, supra note 106, at 637-39. I do not pretend to enter this debate here; my intent is to point out that some argue repeal of the RAP will increase the accumulation of wealth—adversely to societal interests.
[175] See Vallario, supra note 10, at 155-56.
[176] Id.
[177] Bloom, supra note 43, at 574.
[178] Id. at 576.
[179] Id.
[180] See Begleiter, supra note 3, at 25.
[181] See, e.g., Shively, supra note 4, at 378.
[182] See Butler, supra note 26, at 1237 (“If there should be among our rules on which is so abstruse that it is misunderstood by a substantial percentage of those who advise the public, so unrealistic that its ‘conclusive presumptions’ are laughable nonsense to any sane person, so capricious that it strikes down in the name of public order gifts which offer no offense except that they are couched in the wrong words, so misapplied that it sometimes directly defeats the end it was designed to further—then . . . we should take corrective action.”).
[183] See Shively, supra note 4, at 381.
[184] See Levin & Mulroney, supra note 72, at 344 (noting that although the Rule was intended to be applied “remorselessly,” this idea has never been adhered to; rather, “courts have frequently avoided some of the harshest results of a violation of The Rule”).
[185] Id. at 391-92.
[186] See generally Klooster, supra note 106, at 664.
[187] See Vallario, supra note 10, at 156.
[188] See id. at 158.
[189] Id.
[190] Bloom, supra note 43, at 574.
[191] 2001 Tax Act, Pub. L. No. 107-16, § 531, 115 Stat. 72 (2001) (to be codified at I.R.C. § 2011(b)(2)); see also Klooster, supra note 106, at 651.
[192] See Klooster, supra note 106, at 651.
[193] See id. at 657-58.
[194] See Simon Kennedy & Brendan Murray, Tax Plan Sparks Deficit Talk, Des Moines Register, Jan. 9, 2003, at D1. “Qualified dividends” are currently taxed at 15%. See I.R.C. § 1(h)(11).
[195] Jane Norman, Group: Bush Tax Plan Will Cost Iowans, Des Moines Register, Jan. 9, 2003, at B1.
[196] Id.
[197] See Levin & Mulroney, supra note 72, at 334.
[198] Campfield, supra note 126, at 223.
[199] Levin & Mulroney, supra note 72, at 353-54.
[200] Levin & Mulroney, supra note 72, at 354-55.
[201] 2001 Tax Act, Pub. L. No. 107-16, § 501(b), 115 Stat. 65 (2001) (to be codified at I.R.C. § 2664).
[202] I am referencing a state with no RAP and not necessarily New Jersey, which may or may not have a RAP.
[203] I am referencing a state with a RAP and not necessarily New York state, which may or may not have a RAP.
[204] See generally Levin & Mulroney, supra note 72, at 333.
[205] See id.
[206] See id. at 334 (“Guided by the imperative to raise federal revenue and by the desire to limit inordinate amalgamation of wealth through inheritance, Congress utilized the tax system.”).