|
|
|||||
Search In BriefOver a thousand pages of free legal information written by our selected team of legal experts |
|||||
Browse Legal Topics |
Ask a Solicitor Online |
||||
|
|
|||||
|
|
|||||
Search In BriefOver a thousand pages of free legal information written by our selected team of legal experts |
|||||
Browse Legal Topics |
Ask a Solicitor Online |
||||
|
|
|||||
Trustees of Discretionary Trusts
Reform Presumed Resulting Trusts
Discretionary Trusts Beneficiary Rights
Types of Grant and Who Can Apply
Inheritance Provision for Family and Dependants
Provision for Family and Dependants
Trustees Appointing Replacement
Perpetuities and Accumulations Rules
What Happens to Your Body When You Die
Formalities of Making a Will - S.9 Wills Act
Mental Capacity and Power of Attorney
The rules against perpetuities and accumulations are two different legal rules which relate to similar subject matter in the legal area of wills and trusts.
Both rules relate to the ability of one generation to dictate the use and ownership of property in relation to another generation, restricting the future generations of property owners from using the property as they please.
The rule against perpetuities sets a time limit within which future dealings with property must occur. This time limit is referred to as the perpetuity period.
A breach of the rule against perpetuities will result in the settlor’s wishes not being properly fulfilled.
The rule against perpetuities was originally framed as a common law rule. Later it was established by a statute called the Perpetuities and Accumulations Act 1964. This act has recently been amended by the Perpetuities and Accumulations Act 2009.
The rule against excessive accumulations applies where a disposition carries a duty or a power to accumulate income. This means that income is added to the capitol which forms the original trust or monies left in a will have income added to it rather than being distributed.
The rule against accumulations places a time limit on the period during which income can be added to the original capital.
The rule against accumulations has always been framed by statute by the Law of Property Act 1925 and the Perpetuities and Accumulations Act 1964. This act has recently been amended by the Perpetuities and Accumulations Act 2009.
In 1998 the Law Commission issued a detailed report regarding the issues and problems faced by the then existing law on perpetuities and accumulations. In this report the Law Commission provided various options and alternatives on how to amend the law. As a consequence of the report provided by the Law Commission the law has been amended by the Perpetuities and Accumulations Act 2009.
The Perpetuities and Accumulations Act 2009 came into force under the laws of England and Wales on the 6th April 2010.
The law commission identified the following issues with the law relating to perpetuities:
The application of the rule against perpetuities had continually developed over time and as a result had become too wide. The rule applied to a large amount of commercial dealings such as future easements, options and rights of pre-emption. These commercial dealings have nothing to do with family settlements which were the subject matter which the rule was originally designed to protect.
The rule against perpetuities had been developed to apply to certain forms of pensions schemes. Most pension schemes fell outside the rule as had originally been intended however this did not apply to a certain class of pension schemes. The Law Commission felt that there was no sound basis for a group of pension schemes to be subject to this law.
Under the previous law there existed multiple different methods for calculating the perpetuity period. This meant that the rule against perpetuities was becoming unnecessarily complex.
The law commission identified the following issue with the law relating to excessive accumulations:
That there was no longer a sound policy basis for restricting settlor’s ability to direct or allow the accumulation of income.
The only situation where there was seen to be a sound policy basis for this rule was in relation to Charitable Trusts as there is a clear public interest in limiting the time for accumulations thereby enabling income to be spent for the public benefit, rather than simply accumulating for an indefinite period of time.
The Perpetuities and Accumulations Act 2009 has been established in order to eradicate the problems with the previous law and to give effect to the recommendations provided by the Law Commission. Accordingly the previous law has been amended in the following ways.
The Law against perpetuities has been amended in the following manner:
The new Act eradicates the previous uncertainty surrounding the perpetuity period by imposing a single mandatory perpetuity period. This perpetuity period will apply irrespective of what is provided in the original instrument creating the estate or interest. The single mandatory perpetuity period is set by the Act at 125 years.
The rule applies only to future interests and estates that are held on trust. This means that it no longer applies to commercial interests.
The rule is confined entirely to the provisions detailed in the 2009 Act. This means that there is no need to look to the previous common law rules as was the case under the 1964 Act.
There is now a clear exemption in relation to all pension schemes.
The law against excessive accumulations has been amended in the following manner:
The rule against excessive accumulations has been abolished for all non-charitable trusts.
For all charitable trusts there are two accumulation periods available. They are as follows:
21 years
The life of the settlor
Ask your legal question using the box below and have a response from solicitor or barrister within minutes.
