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Frank S. Berall, of Hartford’s Copp & Berall, says Connecticut lawyers are losing trust business to Delaware and Alaska, where statutes modify or abolish the common law Rule Against Perpetuities. Okay, you can’t live forever, and you can’t take it with you. But in more states every year, the obscenely rich can leave their money to “dynastic” trusts specifically designed to take on a life of their own. In an effort to keep legal and banking work for ultra-rich clients from migrating to states with friendlier trust laws, Connecticut lawmakers are poised to modify the hoary “Rule Against Perpetuities.” Its very name strikes fear in the hearts of law school students — an arcane common law rule which limited how long an interest in property could remain in trust limbo, without attaching to or “vesting” with a known recipient. Alaska, South Dakota and Delaware were among the first states to enact statutes that get around the rule, and about two dozen other states now have either abolished it or created longer alternative fixed periods of time. “The problem this is creating in Connecticut,” says veteran estate tax specialist Frank S. Berall, “is that people who want to set up dynastic trusts for their grandchildren, great-grandchildren and down the line of generations, are doing them in other states. “The banks of Connecticut are losing some trust business to Delaware and Alaska, and to some extent the lawyers are too,” he said in an interview. While Connecticut lawyers can draft trusts for other states, Berall notes, a second local lawyer’s review adds expense and sometimes causes the client to simply hire out-of-state counsel in the first place. Last year, the day the members of the legislative Judiciary Committee considered a bill to modify the rule, it was also hearing testimony on two more urgent subjects — victims’ rights and child abuse. Berall, who has previously headed the Connecticut Bar Association’s estate and trusts section, and its tax section, says the lawmakers “had a little fun with us, and we with them” as the focus switched from immediate emergencies to long-range legal metaphysics. A kind of “bidding war” ensued as legislators extended the time period from 90 to 100 to 360 years, finally ending at a 2000 year period of limitations. The bill didn’t come to a vote in the final day of the legislature last year but is expected to fare better this year, he said. Berall, of Hartford’s Copp & Berall, recites what he calls the “rule against perps” or “RVP” with easy familiarity: “The common law rule against perpetuities provides that an interest must vest, if at all, within a period measured by reasonably ascertainable lives in being, plus 21 years and actual periods of gestation. This rule evolved over a great many years, starting with the Duke of Norfolk’s case in 1682 and finally became the way I stated it in the 1890s. Generally an interest was good under the rule, or bad.” If a lawyer mistakenly violated it, the client’s entire estate plan could go up in smoke, and with it, along with the lawyer’s reputation. (Indeed, this was the legal wrinkle in “Body Heat,” a steamy 1980 film noir starring Kathleen Turner and William Hurt.) Last year, the CBA’s proposed revision suggested a flat 1000 years. The three-page bill also would allow a court to reform the trust, if asked, “in the manner that most closely approximates the transferor’s manifested plan.” Lawmakers in the Judiciary Committee recalled the mind-boggling circumstances that could trigger the rule’s harsh effect, as when a man leaves a conditional bequest to “my wife.” Just the theoretical possibility that he’d subsequently remarry to a woman not even born at the time the trust was created, could nullify the trust as violative of the RVP. Problems such as “unborn widows” and “fertile octogenarians” have made the RVP one of law’s thornier patches. This year, Berall and other members of the trust and estates section will testify in favor of a change to a 1000 year period in a bill that does not abolish the old rule, but allows a drafter to specifically elect a longer alternative. Without the legal change, Berall says, a wealthy Connecticut resident who wishes to set up a “dynastic” trust that extends for generations, would have to do so in Alaska, Delaware, or some other state that allows property to remain “unvested” for longer periods of time. Such trusts could make the future gifts conditional on specified behaviors, and could allow large estates to grow vast with investment increases. In 15th century England, tying up wealth under the “dead hand” of a testator for interminable periods was considered bad for commerce and society; hence the RVP.

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