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States Repeal The Rule Against Perpetuities
Q:
I understand Illinois is one of the several states that has repealed the statutory limitation of perpetuities and permits dynastic trusts. Can you furnish me the statutory language that made this possible?
A: Recent Changes to the Rule Against Perpetuities
Effective as of August 17, 1997, Chapter 765 of the Illinois Statutes (Future Interests), Act 305 (Statute Concerning Perpetuities), Section 3 provides: "(a) The rule against perpetuities shall not apply:...(8) to qualified perpetual trusts created by Will or inter-vivos agreement executed or amended on or after January 1, 1998, or to a qualified perpetual trusts created by exercise of a power of appointment granted under instruments executed or amended on or after January 1, 1998."
Chapter 765 defines a "qualified perpetual trust" as a trust"(i) to which, by the specific terms governing the trust, the rule against perpetuities does not apply; and (ii) of which the trustee (or other person to whom the power is properly granted or delegated) has the power in the trust document or under any provision of law to sell, lease, or mortgage property for any period of time beyond the period of the rule against perpetuities."
Thus, it is not enough that the instrument simply call-off the application of the rule, the fiduciary must also be granted the requisite powers to sell, lease and mortgage.
The legislatures in several other states have recently changed their laws with respect to the rule against perpetuities. In addition to Illinois, the states of Alaska, Arizona, Delaware, Idaho, Maine, Maryland, New Jersey, Ohio, Rhode Island, South Dakota and Wisconsin have all either abolished their rules against perpetuities or modified it such that parties can elect to opt-out of it.l Of the states that have recently changed their laws, only Rhode Island and South Dakota have statutes that merely state that the common law rule against perpetuities is inapplicable. The remaining states have new rules, most of which are similar in form to the Illinois statute. Some require the instrument to state that the rule against perpetuities shall not apply to a trust; some impose a specific term of years as an outside time limit for a trust's termination (e.g., 110 years); and some impose no...