I recall a conversation I had a few years ago with a farmer who was interested in creating an estate plan. His most valuable asset, monetarily and emotionally, was the land he and his family had acquired over multiple generations – the majority coming from his father. It was a necessity that his estate plan keep the land his family owned intact. At the time of our conversation, I told him Indiana estate law had limitations on how long an asset could remain in trust, and therefore, a day would come when his children or grandchildren would own the land in their name and could do with it as they saw fit. This has been a disheartening fact for many farmers and families with large estates in Indiana, and for some families, it has led them to create trusts in other states that allow for assets to be held in trust for multiple generations.
On March 11, 2024, Indiana Governor Eric Holcomb signed into law House Bill 1209, which amended Indiana law to extend the number of years a trust could last in Indiana from 90 years to 360 years. The change came to what is called Rules Against Perpetuities (RAPs). RAPs are intended to prevent ownership of assets to be held in trust for multiple generations, and going back to Old English common law, the general amount of time RAPs allowed was 21 years, which would essentially allow the assets to be held in trust long enough for one beneficiary. Extending the RAP to 360 years allows for four to five generations of beneficiaries to receive the asset protection and taxation benefits that a trust provides.
The RAP extension has now opened the door for Indiana attorneys to create Dynasty Trusts as well. A Dynasty Trust is an irrevocable trust that provides tax-minimization and asset protection benefits, and they are specifically written to last for more than two generations, as long as the trust’s money and property remain. They are not for most people – they make the most sense for families who have an estate value that exceeds the Federal government’s current estate tax exclusion of $13,990,000 for an individual, or $27,980,000 for married couples. This essentially means that Hoosiers will not pay estate taxes as long as their estate is less than $28M.
For the majority of people who are creating or modifying their estate plans, the change to Indiana’s RAPs can be integrated through a Revocable Living Trust, and if a family has concerns about creditor protections, these protections can be included through Asset Protection Trusts without the need of a Dynasty Trust.
While Dynasty Trusts are not for everyone, it is important to know that Indiana residents can now create one within the Hoosier state. However, the changes to the rules against perpetuities in Indiana are significant and should be considered when working through your estate plan. Now is as good a time as ever to contact an attorney to make sure your documents reflect these changes and review your current plan to ensure your documents are up to date.
If you would like to learn more about Indiana Dynasty Trusts, or Trusts in general, please contact Daren here: https://www.yourlifeafterwork.com/dynastytrust
Financial Enhancement Group is an SEC Registered Investment Advisor.
