07 January 2010
Leaving property in trust for future generations will be modernised and simplified by the Perpetuities and Accumulations Act 2009.
The Act will come fully into force on 6 April 2010 by virtue of a Commencement Order announced in Parliament today by Justice Minister Bridget Prentice.
The Act covers two areas of trust law:
Perpetuities
Under the Act a standard perpetuity period of 125 years will apply to property put in trust, by will or otherwise. The perpetuity period limits the length of time that the future ownership of property can be dictated by a person setting up a trust. The new time limit aims to strike the balance between respecting the intentions of people who give away property, against the needs of future generations to use estates for other purposes that might be more appropriate in future years.
Accumulations
The Act will remove the current limits on the time that the terms of a trust can require the trustees to accumulate investment income rather than distributing it. The previous law derived from legislation in the early 19th century that was designed originally to prevent individuals accumulating enough money to threaten the national economy – which is no longer a risk in the global 21st century financial market. Charities will be subject to an accumulation limit of 21 years or, if specified, the remainder of the life of the settlor, unless the court or the Charity Commission allows longer.
Justice Minister Bridget Prentice said:
‘The laws around perpetuities and accumulations were confusing, complicated and outdated. Now they are clearer, simpler and better fitted for the 21st century.’
The Perpetuities and Accumulations Act 2009 is the first of two pieces of primary legislation to enter Parliament under a trial of a proposed House of Lords procedure for legislation implementing Law Commission recommendations. The second Bill in the scheme – the Third Parties (Rights against Insurers) Bill – was introduced into the House of Lords in November 2009.
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