Until recently, Texas had a law that sharply limited the duration of trusts. The trust could only last until 21 years after the last living person who established it passed away. This is based on old English laws, and it’s much more restrictive than laws in many other states. It was known as the Rule Against Perpetuities. Luckily, this law changed recently. As of September 2021, trusts can last for up to 300 years in Texas.
Creating generational wealth
Until now, estate planning professionals in Texas have faced an uphill battle in helping their clients create generational wealth. The old law was designed to limit the creation of dynasties. But it had the unfortunate side effect of making it hard for working people to pass on their wealth as they saw fit. The new law changes all of that.
Going forward, these estate planning trusts in Texas will have a 300-year clock starting from the date they become effective. That can vary on a case-by-case basis. This rule applies to irrevocable trusts, which generally can’t be changed once they go into effect. Some people will elect to have an effective date from the time the paperwork is signed. Others will design the trust to become effective at the time they’re incapacitated or die.
Texas’ new take on estate planning will make it possible for families to pass on their wealth to future generations. As things like elder care and homeownership become more expensive, this will be a huge help to many families. The new law will also help keep wealth in Texas. In the past, some families left the state for areas with less restrictive rules. It’s hoped the new law will help prevent that from happening going forward.