A: Dynasty trusts have become increasingly popular in recent years and have received a lot of attention. Basically, a dynasty trust is a trust that is not limited by the rule against perpetuities and can therefore last forever.

The rule against perpetuities dates back to English common law and generally states that a trust must terminate before 21 years have passed since the death of the beneficiaries who were living when the trust first became irrevocable. This law was enacted, and continues today, to keep real estate from being tied up in trusts, thereby hindering commercial development.

But many states have abolished the rule against perpetuities, including Florida, Illinois, Wisconsin, Arizona, Delaware, South Dakota, Alaska, and Nevada. Therefore, a dynasty trust can be created in these states, and the trust creator could allocate generation-skipping transfer tax exemption to the trust, thereby removing those assets from the estate and gift tax system forever.