The character played by George Clooney in The Descendants is under pressure to sell extremely valuable Hawaiian land, which has been held in a trust for his family for over a hundred years. If he doesn’t act soon, the trust will terminate and rights to the property will be distributed outright to dozens of family members. They might never agree among themselves on what to do with the property without expensive and extensive litigation.
Why will the trust 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 alive 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.
Here’s an example to illustrate how this works. Let’s say that Grandpa created a trust for his and Grandma’s benefit in 1970. The trust says that after they have both died, 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 grandchildren, 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 1970 must end and distribute its then remaining property to Grandma and Grandpa’s then living descendants by 2091—21 years after Marie’s death.
This is the prospect facing George Clooney’s family inThe 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 hands 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 it causes 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 property and people hundreds of years from now when we have no idea what conditions and situations they may face.