By Harry S. Margolis
The George Clooney character in his new movie,The Descendants, is under pressure to sell extremely valuable Hawaiian land held in trust for his family for over a hundred years because if he doesn't act soon the trust will terminate with the property being distributed outright to dozens of family members. They might never agree among themselves what to do with the property without expensive and extensive litigation.
The reason the trust will end? The "rule against perpetuities," the bugaboo of many a first-year law student.
The rule against perpetuities is part of ancient common law which says that no trust may last more than "21 years plus a life in being." What these cryptic words mean is that all trusts must end at the latest 21 years after the death of a beneficiary who was a live when the trust was created. It doesn't matter whether the individual was a beneficiary at the time the trust was written, just that they would become a beneficiary at some point.
An example should illustrate how this works. Let's say that Grandpa created a trust for his and Grandma's benefit in 1970. The trust says that when they die the trust will continue, first for their three children, Bob, Walter and Alice, and then for their grandchildren. In 1970, they have five grandchildren, George, Betty, Jeffrey, Tricia and Marie.
Later, Grandma and Grandpa have more children, but they are irrelevant to this calculation.
Grandpa dies in 1980 and Grandma in 1990. Bob, Walter and Alice pass away, respectively in 2000, 2010 and 2020, leaving their children and grandchildren as beneficiaries.
George, Betty, Jeffrey, Tricia and Marie pass away, respectively in 2030, 2040, 2050, 2060 and 2070 -- yes, Marie lives for more than 100 years. Under this scenario, the trust that was created in 2070 must end and distribute its then remaining property to Grandma and Grandpa's then living descendants by 2091.
This is the prospect facing George Clooney's family in The Descendants.
The reasoning behind having such a rule is that people and property should be free. There should be a limit to how long the dead hand of ancestors can continue to control property and descendants. Given life expectancies, under the rule against perpetuities, that's about 100 years.
In recent years a number of states have passed statutes either clarifying the rule by setting a particular time limit, lengthening it to several centuries, or eliminating it entirely, permitting perpetual trusts. While that might solve the immediate problem for the characters in The Descendants, I agree with the concept that trusts should not last forever. Those alive today should not control what happens to the property and people who must face conditions and situations we have now way of predicting.