Because of numerous problems with trust law (which is based both on common law and the Perpetuities and Accumulations Act 1964), the Government has, after a long consultation process, introduced new legislation in the form of the Perpetuities and Accumulations Act 2009, which is scheduled to become law later this year. The principle behind the rule against perpetuities is to prevent the control of assets being effectively in the hands of those long deceased.
The new Act will govern all trusts made after it receives Royal Assent.
Changes being introduced include:
- a single maximum perpetuity period of 125 years (which may be somewhat shorter than is possible under the present system);
- the perpetuity period will not apply to commercial interests, but only those future interests held on trust;
- the abolition of common law periods of perpetuity;
- the right for existing trustees to use a perpetuity period of 100 years if they choose (the current rule is ‘a life in being plus 80 years’); and
- pension schemes established under trust will be exempt.
The new rules may have implications, in particular, for trusts established under wills.