Why the Generation-Skipping Transfer Tax Sparked Perpetual Trusts

Max M. Schanzenbach and Robert H. Sitkoff, in the work they presented at this Symposium and in their earlier work, Jurisdictional Competition for Trust Funds: An Empirical Analysis of Perpetuities and Taxes, provide data to support what practitioners, policymakers, and academics already believe - the generation-skipping transfer (GST) tax exemption encouraged the creation of dynastic trusts and made those states that had no Rule Against Perpetuities (RAP) and no income tax on trusts particularly attractive as sites for settlors to establish their trusts. 1 Their work with the state-level panel data assembled from annual reports to federal banking authorities by institutional trustees is impressive and provides compelling evidence of the agility of estate planners and trust departments of banks to take advantage of state laws that lower the cost of giving. Schanzenbach and Sitkoff\u27s study attributes repeal of the RAP and the growth of perpetual trusts to the GST tax exemption. Throughout their article, however, they write about how the GST tax sparked the movement to abolish the Rule and the rise of the perpetual trust. 2 I want to talk about the components that made up the dry tinder on which that spark fell