After 21 years of the family trust's formation, the trust is deemed to have disposed of and reacquired certain types of property at their fair market value. This can give rise to a capital gain since most property increases in value over time. The 21 year rule for Trusts and its impact on you, should be discussed with a professional accountant.
Note that capital gains realized inside a trust are taxed at the highest marginal tax rate. The trust may not even have the cash-flow to pay the income tax liability triggered as a result of the 21 year rule. A professional tax expert can help you utilize the many tax strategies available to plan for this event.
