The Wall Street Journal yesterday published an interesting article on so-called "dynasty trusts":  Looser Trust Laws Lure $100 Billion Amid Congressional Scrutiny, Huge Sums Pour Into States That Allow "Dynasty Trusts."

The article is based in large part on recent work by Robert H. Sitkoff (Northwestern) & Max Schanzenbach (Northwestern), Jurisdictional Competition for Trust Funds: An Empirical Analysis of Perpetuities and Taxes, available on SSRN. Here is the abstract:

This paper presents the first empirical study of the jurisdictional competition for trust funds. In order to open a loophole in the federal estate tax, a rash of states have abolished the Rule against Perpetuities. Based on reports to federal banking authorities, we find that through 2003 a state’s abolition of the Rule increased its trust assets by $6 billion (a 20% increase on average) and increased its average trust account size by $200,000. These estimates indicate 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 increase in trust business from abolishing the Rule. This is a striking finding for the theory of jurisdictional competition, because it implies that abolishing the Rule does not directly increase a state’s tax revenue. These results also have relevance for theories relating to altruism and the bequest motive. The main tax benefits of establishing a perpetual trust accrue not to the donor or anyone she knows, but to beneficiaries whom the donor has never met – the unborn.