Perpetuity

• What is the primary purpose of a trust?

  A trust is a temporary arrangement for dealing with property.
• How long can some trusts last?

  Some trusts may last for only a very short period, while others can last many years.
• What does the rule in Saunders v Vautier allow beneficiaries to do?

  It allows beneficiaries with vested interests to bring the trust to an end and take full control of the property.
• What is the challenge with discretionary trusts regarding the rule in Saunders v Vautier?

  It is unlikely that all potential objects can exercise the rule in practice.
• What limits the duration of a discretionary trust?

  The trustees are obliged to exercise their discretion within a reasonable timeframe.
• What should a trust instrument ideally contain regarding its duration?

  It should expressly limit the duration of the trust.
• What is a gift-over clause in a trust instrument?

  It provides for the property to be distributed to a particular beneficiary if the trust ends.
• What is the public interest regarding the duration of trusts?

  It is not in the public interest for property to be tied up on trust indefinitely.
• What are the two sets of perpetuity rules?

  The rule against remoteness of vesting and the rule against inalienability.
• What does the rule against remoteness of vesting require?

  A person or charity must obtain a vested interest in the trust property within a recognized perpetuity period.
• What is the statutory perpetuity period according to the Perpetuities and Accumulations Act 2009?

  125 years.
• What happens to any interest under a trust that does not vest within the statutory perpetuity period?

  It is void.
• What is the 'wait and see' rule?

  It allows the trust to subsist until it becomes apparent that the interest cannot vest within the perpetuity period.
• What do 'class closing' rules do?

  They can save a trust by excluding objects whose interests would vest outside the perpetuity period.
• Why is the statutory perpetuity period designed to accommodate common uses for trusts?

  To prevent simple life interest trusts from failing.
• What is the issue with a trust that holds property for A for life, remainder to B if B survives A?

  B has a contingent interest, and the trust could fail for perpetuity if A lives more than 125 years.
• What happens when a trust holds property for A (age 2) for life, remainder to A's children and grandchildren?

  The trustee cannot divide the property until all beneficiaries are ascertainable, which could take many years.
• How do class closing rules apply in the context of a trust for A's children and grandchildren?

  They limit the class of beneficiaries to those alive at the end of the perpetuity period.
• What is the main problem with poorly drafted trust provisions?

  They can prevent intended beneficiaries from making use of their interests under the trust.
• What is the benefit of a trust that holds property for A for life, remainder to A's children and grandchildren living at A's death?

  It allows the trustee to immediately divide the property among the living beneficiaries.
• What happens if a trust holds property for the first of the settlor's lineal descendants to obtain a first class law degree?

  The wait and see rule applies, allowing the trust to last up to 125 years.
• What occurs if no lineal descendant satisfies the condition within 125 years?

  The trust will come to an end.
• What is the common law perpetuity period for non-charitable purpose trusts?

  21 years.
• What must be clear from the outset of a trust under the common law rule against inalienability?

  That the trust will come to an end within the common law perpetuity period.
• What is required for a non-charitable purpose trust to be valid?

  It must contain an express perpetuity period limiting its duration.
• Why do non-charitable purpose trusts need an express perpetuity clause?

  To ensure their validity and compliance with the law.
• What is an example of an express perpetuity clause?

  Providing that the trust should last for 21 years.
• What is a Royal lives clause?

  It specifies that the perpetuity period starts running at the death of a named person.
• What are the key points regarding the statutory rule against remoteness of vesting?

  • Applies to trusts with people or charities as objects.
  • Statutory perpetuity period is 125 years.
  • Trust property must vest in a person or charity by the end of this period.
  • The 'wait and see' rule applies.
  • Class closing rules apply at the end of the statutory perpetuity period.
• What are the key points regarding the common law rule against inalienability?

  • Applies to non-charitable purpose trusts.
  • Common law perpetuity period is 21 years.
  • Must be clear from the outset that the trust will end within this period.
  • No 'wait and see' rule applies.
  • Can be extended by reference to a life in being.