Creating a family trust that will endure for generations is an ambition of many people who have amassed significant wealth. Under California law, however, there is a limit on how long an interest created by a trust can last. That limit is called the “rule against perpetuities.”
The common law rule against perpetuities first appeared in England and has been around for centuries. But, California has enacted the Uniform Statutory Rule Against Perpetuities, which supersedes the old common law rule.
Under the Uniform Rule, which is found in the California Probate Code, an interest in a trust will be invalid if either of two alternative conditions are not met. Under the first alternative, the interest must be certain to either vest — that is, go from being merely an expected interest to an enforceable legal right — or terminate no later than 21 years after the death of a potential beneficiary who was alive when the trust was created. Under the second alternative, the interest must actually vest or terminate within 90 years after the trust was created.
The purpose of the rule against perpetuities is to prevent property interests from being tied up for generations after a trustor’s death. Thus, a provision in a trust that grants a property interest to a person who will be born several generations in the future — such as a potential great-great-great-great grandchild of the trustor — will usually be invalid under the rule.
Whether an interest granted by a trust violates the rule against perpetuities can be notoriously difficult to determine. Those who wish to create a trust that will control assets for a long time after they die should be careful that the trust is drafted so as not to violate the rule, or any other laws.
Source: California Legislative Information, “Cal. Prob. Code §§ 21205-09,” accessed Jan. 27, 2017