Perpetuity

Question 1

What is the nature of trusts?

Answer 1

Trusts are temporary arrangements for dealing with property.

Question 2

What does the rule in Saunders v Vautier allow?

Answer 2

It allows beneficiaries with vested interests to bring the trust to an end and take full control of the property.

Question 3

How do discretionary trusts limit duration?

Answer 3

Trustees must exercise their discretion within a reasonable timeframe, limiting the trust’s duration.

Question 4

What is a common practice for trust instruments regarding duration?

Answer 4

It is good practice to expressly limit the duration of the trust, often referred to as the ‘Trust Period’.

Question 5

What happens if there is no express limitation on trust duration?

Answer 5

With the exception of charitable trusts, trusts cannot go on indefinitely due to public interest.

Question 6

What are the two sets of perpetuity rules?

Answer 6

1. The rule against remoteness of vesting. 2. The rule against inalienability.

Question 7

What does the rule against remoteness of vesting require?

Answer 7

A person or charity must obtain a vested interest in the trust property within a recognized ‘perpetuity period’.

Question 8

What is the statutory perpetuity period according to the Perpetuities and Accumulations Act 2009?

Answer 8

The statutory perpetuity period is 125 years.

Question 9

What happens to interests that do not vest within the statutory perpetuity period?

Answer 9

Any interest that does not vest within this period is void.

Question 10

What is the ‘wait and see’ rule?

Answer 10

It allows the trust to subsist until it becomes apparent that the interest cannot vest within the perpetuity period.

Question 11

What is the rule against inalienability?

Answer 11

Assets cannot be tied up on trust for longer than a specified life in being plus 21 years.

Question 12

How does the common law perpetuity rule differ from the statutory rule?

Answer 12

The common law rule is stricter and does not allow for a ‘wait and see’ approach.

Question 13

What is an example of a non-charitable purpose trust that would fail due to the rule against inalienability?

Answer 13

A trust to maintain a pet tortoise would fail due to the rule against inalienability.

Question 14

What is an express perpetuity clause?

Answer 14

An express perpetuity clause specifies the duration of the trust, such as lasting for 21 years.

Question 15

What is a Royal lives clause?

Answer 15

It allows the perpetuity period to start running at the death of a named person, extending the trust duration.

Question 16

What is the summary of the statutory rule against remoteness of vesting?

Answer 16

It applies to trusts with people or charities as objects, with a 125-year period for property to vest.

Question 17

What is the summary of the common law rule against inalienability?

Answer 17

It applies to non-charitable purpose trusts with a 21-year period, requiring clarity from the outset.