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http://hdl.handle.net/2451/26007
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| Title: | Jurisdictional Competition for Trust Funds: An Empirical Analysis of
Perpetuities and Taxes |
| Authors: | Sitkoff, Robert H
Schanzenbach, Max |
| Issue Date: | 2006 |
| Series/Report no.: | CLB-06-034 |
| Abstract: | abstract . This Article presents the first empirical study of the
domestic jurisdictional competition for trust funds. To allow donors to
exploit a loophole in the federal estate tax, since 1986 a host of
states have abolished the Rule Against Perpetuities as applied to
interests in trust. To allow individuals to shield assets from
creditors, since 1997 a handful of states have validated self-settled
asset protection trusts. Based on reports to federal banking
authorities, we find that, on average, through 2003 a state’s
abolition of the Rule increased its reported trust assets by $6 billion
(a 20% increase) and increased its average trust account size by
$200,000. By contrast, our examination of validating self-settled asset
protection trusts yielded indeterminate results. Our perpetuities
findings imply that roughly $100 billion in trust funds have moved to
take advantage of the abolition of the Rule. Interestingly, states that
levied an income tax on trust funds attracted from out of state
experienced no observable increase in trust business after abolishing
the Rule. Because this finding implies that abolishing the Rule does not
directly increase a state’s tax revenue, it bears on the study of
jurisdictional competition. In spite of the lack of direct tax revenue
from attracting trust business, the jurisdictional competition for trust
funds is patently real and intense. Our findings also speak to
unresolved issues of policy concerning state property law and federal
tax law. |
| URI: | http://hdl.handle.net/2451/26007 |
| Appears in Collections: | NYU Pollack Center for Law & Business Working Papers
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