Most states including California have laws limiting the duration of trusts. In some instances, the trust is invalid if it goes on longer than (a)21 years after the death of the Creator and of every beneficiary living on the death of the Creator , or (b)if there is a married couple and part of the trust becomes irrevocable when one spouse dies,then if it goes on longer than 21 years after the death of the last beneficiary living at the death of the first Creator to die, or (c)if there is a married couple and all of the trust remains revocable by the surviving spouse then if it goes on longer than 21 years after the death of the last beneficiary living at the death of the Surviving Creator.
A trust can contain a provision saying that if the trust goes on too long, then at the point in time when it would otherwise be void, it shall be distributed. This is a ‘savings clause’ or a clause to avoid the trust from becoming void because it violated the rule against perpetuities.
For example, if assets are to be held for the Creators grandchildren, there is a potential for violating the rule because some grandchildren may be born after the Creator or the Surviving Creator has died. In this case, their lives cannot be measuring lives. So lets say that the trust provides that grandchildren inherit at age 35. A grandchild could be born one year after the Creator’s death. By the time that person reaches age 35, more than 21 years could have gone by since the death of the last beneficiary living on the Creator’s death.
Further, if a client wants to hold the assets in trust after the Creator or the Surviving Creator has died, it is a good idea to put a time limit on the life of the trust. Does the Creator really want the successor trustee to keep the assets in trust forever or for as long as the successor trustee feels like it, even if the beneficiary want and/or need to receive distributions? Also, the successor trustee has duties to the beneficiaries on whose behalf he is managing the assets. If the trust is vague about what the successor trustee should do with the assets during the time (after the Creator’s death) that he is holding them in trust, this will only provide fuel for disputes and litigation between the successor trustee and the beneficiaries over what is reasonable and prudent and over what the Creator (now deceased) really intended.