Sooner or later it dawns on us that taking our wealth with us when we check out is not an option. Leaving it to Junior who, with various body piercings, tattoos, and questionable friends, is interested in spending, not managing, the wealth, is also not an option. The English, about the time of Robin Hood, came up with a solution they called “uses”—we know this principal of law as “trusts.”

A trust is a legal entity that can own, manage, and dispose of property, according to applicable laws and the language of the trust document. A “trustor or grantor” who places property into the trusts by changing the ownership into the name of the trust creates a trust. A “trustee” manages the trusts, while a “beneficiary” receives the benefits.

In modern context, trusts are used to manage wealth for purposes of reducing estate, or gift taxes, caring for beneficiaries not capable of managing their affairs, and providing for the health and educational needs of future generations.

In feudal England, kings taxed the transfer of property from a nobleman to his descendants. To avoid these taxes, the good lords came up with the concept of “uses,” the trusts of the times, which gave rights of usage to descendants, but not ownership. This maintained a perpetual ownership, depriving current and future kings of taxes.

Kings reacted to these trusts as you might expect, by outlawing perpetual ownership. In 1681, the Law of Perpetuities was actually codified by Lord Nottingham, who held that a trust could exist only for the lifetime of the beneficiary, living at the time the trust was created. Later, the law was modified so that the trust could extend for 21 years after the death of a person alive at the time the trust was created. This remains the modern version of our current trust law, and the rule against perpetuities.

Lord Nottingham’s ruling, besides ensuring a flow of tax revenue for the King, was well grounded in social issues. If property was held forever in trust, there could be no market for the property. There could be no opportunity for entrepreneurial development. Wealth would remain in the hands of a few, leaving the poor without opportunity to better themselves.

Trust laws in the U.S. did not allow for these dynasty trusts until 1983 when South Dakota changed their laws to allow for the creation of dynasty trusts. Today, these trusts are now legal in 13 states: Alaska, Arizona, Delaware, Idaho, Illinois, Maine, Maryland, New Jersey, Ohio, Rhode Island, South Dakota, Virginia, and Wisconsin.

Not all dynasty trusts are created equal. Some states, such as Delaware, Alaska, South Dakota, and Illinois do not tax the income of trusts brought in from out of state, while they do tax residents. Alaska has a very aggressive statute that allows the grantor (person placing the property into the trust) to receive income from the trust while at the same time allowing the assets within the trust to grow outside of his estate. This places the assets outside the grasp of creditors and some potential future estate taxation.

Just when you thought we got rid of kings centuries ago, think again. In 1986 Congress created the Generation Skipping Transfer Tax (GSTT) which taxed a trust at the maximum estate tax rate, 55%, each time the last members of a generation drawing benefits from a trust died. Congress did allow for an exemption of $1.06 million that could be used at the time the trust is set up. This allowed a couple to put just over $2 million in the trust and have the trust avoid paying the GSTT, no matter how many generations in the future draw from it.

Such dynasty trusts, properly funded and managed, could allow a family’s wealth to benefit many, many generations, effectively allowing the creator the opportunity to control from the grave.