Article On Forced Vesting And The Rule Against Perpetuities

James B. Spica (Dickinson Wright PLLC) recently published an article entitled, Means to an End: Electively Forcing Vesting to Suit Tax Rules Against Perpetuities, 40 ACTEC J. 347 (2014). Provided below is an abstract of the article:

Exercising special powers of appointment over tax advantaged trusts in a jurisdiction that has enacted perpetuities reform, can be hazardous in light of the so-called “Delaware tax trap” and the “constructive additions” and trust modification rules of the Treasury’s GST-tax effective date regulations. Compliance with the federal tax rules against perpetuities may or may not be guaranteed by the applicable reform legislation. This article examines a particular situation in which self-help is required for compliance, offers a set of forced-vesting provisions to fit the bill, and indicates how those provisions can be adapted for use in other situations in which, in light of local perpetuities reform, the exercise of a special power of appointment threatens the longevity of federal tax advantages.