Rules against perpetuities and accumulations
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.
Rule against perpetuities
What is meant by the rule against perpetuities?
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.
Breach of the rule against perpetuities
A breach of the rule against perpetuities will result in the settlor’s wishes not being properly fulfilled.
How did the rule against perpetuities come about?
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.
Rule against accumulations
What is meant by the rule against accumulations?
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.
How did the rule against accumulations come about?
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.
The Law Commissions report on the problems with the rules against perpetuities and accumulations
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.
When did the Perpetuities and Accumulations Act 2009 come into existence?
The Perpetuities and Accumulations Act 2009 came into force under the laws of England and Wales on the 6th April 2010.
What were the problems with the existing law identified by the Law Commission?
Rule against perpetuities
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.
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.
For more information on:
- Rule against excessive accumulations
- The Perpetuities and Accumulations Act 2009
- What changes to the law have been brought about by the Perpetuities and Accumulations Act 2009?
- Law against perpetuities
- Law against excessive accumulations
- The accumulation limit will apply regardless of whether the settlor is a corporate settlor or a private individual.