Factors Bearing on Trust Situs Selection Analyzed

The Program on Corporate Governance has recently released a new discussion paper entitled Perpetuities, Taxes, and Asset Protection: An Empirical Assessment of the Jurisdictional Competition for Trust Funds, authored by Robert Sitkoff (John L. Gray Professor of Law, Harvard Law School) and Max Schanzenbach (Benjamin Mazur Professor of Law, Northwestern University School of Law).

Here are excerpts from the abstract of this paper as posted by Robert Sitkoff on March 5, 2008:

This chapter provides an accessible overview of our previous work on the impact of the abolition of the Rule Against Perpetuities (RAP) on trust fund situs. The implementation of the Generation Skipping Transfer (GST) Tax by the Tax Reform Act of 1986 sparked a movement to repeal the RAP.***

Our findings imply that roughly $100 billion in trust funds have moved to take advantage of the abolition of the RAP. ***

We conclude that the jurisdictional competition for trust funds is real and intense, with the primary margin of competition being the rules that bear on trust duration, and that the enactment of the GST tax sparked the rise of the perpetual trust.***