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S PE CI ALI ZE D TRU S TS
SUPREME COURT OF NEVAD A V ALIDATES THE AUTHORITY OF THE NEVAD A
L EG I SL ATU RE TO CRE ATE S T AT U TE S TH AT DEFINE “ PERPE TUI TI ES”
Nevada’s dynasty trust statute permits trusts to last up to 365 years.
Nevada is one of 29 states that by statute has either extended or eliminated its Rule Against
Perpetuities.1 In 1987 the Nevada legislature adopted the Uniform Statutory Rule Against
Perpetuities, to allow an interest in property to last 90 years or 21 years after the death of an
individual living at the time of the interest’s creation, whichever is longer. In 2005 the
Nevada Legislature modified the statutory Rule Against Perpetuities to allow 365-year
interests. This is the statute that applies in Nevada today.2
In March 2015 the
Supreme Court of
Nevada indirectly
confirmed the validity of
Nevada’s statutory
Rule Against
Perpetuities which
permits trusts to last for
as long as 365 years.
Nevada is among nine states that have a prohibition against “perpetuities” in its state
constitution. Specifically, Section 4 of the Nevada Constitution contains the following
sentence, “No perpetuities shall be allowed except for eleemosynary purposes.” Therefore,
pursuant to the Nevada Constitution, perpetual trusts cannot be created in Nevada unless they
are for charitable purposes. In 2002 a voter referendum was held in Nevada to attempt to
amend the Nevada Constitution to repeal the prohibition against perpetuities. However,
voters declined to ratify that action. Thus, in 2005 when the legislature enacted the statute to
extend the duration of the permissible perpetuities period for trusts created in Nevada, the
legislature was constrained by the state constitution.
With the amendment of the statute in 2005, although the Nevada Constitution does not permit
non-charitable perpetual trusts, the statute does permit non-charitable trusts to last up to 365
years.3
The constitutionality of the Nevada statute was recently called into question.
In late 2014 an article in The Vanderbilt Law Review4 by attorney Steven J. Horowitz and law professor Robert H.
Sitkoff suggested that the Nevada statute allowing trusts to last up to 365 years might violate the Nevada Constitution
because the Nevada Constitution does not allow property interests to last in perpetuity. Although the Nevada statute
does not allow a trust to last in perpetuity, the argument posed was that the long-term nature of 365 years may violate
the intent of the Nevada Constitution’s ban on perpetuities.5 The implication was that since establishing a dynasty trust
in Nevada might violate the Nevada Constitution, Nevada may not be a good state in which to establish a long term
dynasty trust.
This law review article received a notable amount of attention. It was the subject of a New York Times article,6 and was
followed by articles that added to the concern as well as argued against the concern.7 It should be noted that although the
law review article discussed the same issue for nine states including Nevada, because of the popularity of Nevada trusts
the discussion of Nevada’s statute garnered a significant amount of interest.
The Supreme Court of Nevada has recently addressed this issue.
In March 2015 the Supreme Court of Nevada indirectly confirmed the validity of Nevada’s statutory Rule Against
Perpetuities which permits trusts to last for as long as 365 years. In the decision known as the Bullion Monarch8 case,
the Supreme Court of Nevada made it clear that the Nevada Legislature has the authority to decide how the Rule
Against Perpetuities applies to property interests in Nevada.
Although the Bullion Monarch ruling applies to a commercial transaction between two mining companies and did not
address the statute that creates the ability to create a trust that lasts up to 365 years, the reasoning applied by the Court is
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instructive. Two mining companies were arguing before the U.S. Court of Appeals for the Ninth Circuit over a mining
royalty agreement and the application of the common law Rule Against Perpetuities to that royalty agreement. The
Circuit Court certified that question to the Supreme Court of Nevada. The Supreme Court of Nevada upheld the Nevada
statute9 that excludes non-donative transfers such as commercial leases from the Rule Against Perpetuities as defined
under Nevada common law and the Nevada Constitution. Nevada’s highest Court held, without any dissenting opinions,
that the definition of “perpetuities” in the Nevada Constitution is not static and the Nevada legislature has the ability to
create statutes that define what constitutes “perpetuities.” Although the Bullion Monarch decision did not directly
address the statute permitting dynasty trusts to last up to 365 years, it appears that in order to hold that this statute
violates the Nevada Constitution the Supreme Court of Nevada would have to reverse its ruling that the Nevada
Legislature has the authority to create statutes that define “perpetuities.”
Please contact us
Your Northern Trust representative is available to discuss this and any Nevada trust questions with you. Please contact
your representative, or any of the following people:
Kerry Hall, Senior Trust Advisor, The Northern Trust Company of Nevada (702-304-6840, [email protected])
David Diamond, President, The Northern Trust Company of Delaware (302-428-8711, [email protected])
1
See Jeffrey A. Schoenblum, 2013 Multistate Guide to Estate Planning, table 9 (2012) (collecting state perpetuities laws).
NRS 111.1031.
3
For a summary of the history of the Nevada Rule Against Perpetuities, see “Nevada Dynasty Trusts Strike Gold In
Perpetuities in Bullion Monarch”, Jay Adkisson, Forbes, 4/25/2015, http://onforb.es/1JDw1mx.
4
67 Vanderbilt Law 1769 (2014).
5
The authors based their analysis in part on the fact that they determined that the word “perpetuities” in the Nevada
Constitution meant “an entail”, which is a restriction on the sale or inheritance of property, and they concluded that the 365
year period created an entail that violates the public policy upon which the prohibition of “perpetuities” is based.
6
The Ins and Outs of Trusts That Last Forever, Paul Sullivan, The New York Times, December 5, 2015.
7
See, “What If Perpetual Trusts Are Unconstitutional?”, Jonathan Blattmachr, Mitchell Gans, William Lipkind, LISI Estate
Planning Newsletter #2263, (December 18, 2014) at http://www.LeimbergServices.com for an article that added to the
concerns posed in the Horowitz-Sitkoff law review article; See also “The Rebuttal to Unconstitutional Perpetual Trusts”,
Steve Oshins, LISI Estate Planning Newsletter #2265 (December 22, 2014) at http://www.leimbergservices.com for an article
that argued against the points raised in the Horowitz-Sitkoff law review article and the Blattmachr, Gans, Lipkind article.
8
Bullion Monarch v. Barrick Goldstrike, 131 Nev. Adv. Op. 13, March 26, 2015 (En Banc).
9
NRS 111.1037.
2
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Legal, Investment and Tax Notice: This information is not intended to be and should not be treated as legal
advice, investment advice or tax advice. Readers, including professionals, should under no circumstances
rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice
from their own counsel.
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