Perpetuity

Question 1

How are trust instruments often brought to an end?

Answer 1

Express trust period clause in the trust instrument

Question 2

What is the rule against the remoteness of vesting?

Answer 2

A person / charity must obtain a vested interest in the trust property within a recognised perpetuity period. This is 125 years.

Question 3

What happens if the statutory perpetuity period expires?

Answer 3

The trust is void - this need not be clear from the outset of the trust.

There will be a resulting trust for the settlor or more likely, the settlor’s estate.

Question 4

What are ‘class closing’ rules?

Answer 4

Trust can be saved by excluding objects who might otherwise cause the trust to fail.

E.g. limiting class of beneficiaries to someone’s children and grandchildren alive at the end of the perpetuity period.

Question 5

What perpetuity rules apply to charities?

Answer 5

None - they can go on indefinitely

Question 6

What is the rule against inalienability?

Answer 6

Assets can’t be tied up on trust for longer than a specified life in being + 21 years.

Only relevant to non-charitable purpose trusts.

Question 7

How is the rule against inalienability applied strictly?

Answer 7

Must be certain at the time the trust is created - otherwise it will be void - no ‘wait and see’ rule.

You should include an explicit clause limiting the trust to the common law perpetuity period of 21 years / life in being + 21 years for any NCPT

Question 8

If you say a trust is “for as long as the law allows” will it be valid for perpetuity?

Answer 8

Yes - any provision to this effect works

Question 9

Which perpetuity rule applies to non-charitable purpose trusts?

Answer 9

Rule against inalienability - certain life in existence plus 21 years

Question 10

When should you consider the rule against the remoteness of vesting?

Answer 10

In trusts regarding people, or charities, where the trust does not immediately give rise to vested interests in the trust property

Question 11

Does there have to be an express perpetuity clause in an NCPT?

Answer 11

YES - no wait and see rule