Perpetuities and Accumulations Bill [HL]. Bill 145 2008-09.
The Bill is the first to be considered under a new House of Lords procedure for Law Commission bills and would implement, with minor modifications, the recommendations of a 1998 Law Commission report on the rule against perpetuities and the rule against excessive accumulations. The rule against perpetuities sets a time limit, known as the perpetuity period, within which dealings with property which are to take effect in the future (such as a gift to a child who is not yet born) must occur. The Law Commission report considered that the application of the rule is now too wide: it applies, for example, to many commercial dealings which have nothing to do with the family settlements that the rule was designed to control. Moreover, it found that the existence of multiple methods for calculating the perpetuity period is complex and confusing. The Bill defines the circumstances in which the rule would apply. In general terms, it would only apply to rights under trusts. Other property rights would no longer be subject to the rule. Where the rule does apply, the perpetuity period would be 125 years. This period would generally apply prospectively only. The rule against excessive accumulations applies where a disposition carries a duty or a power to accumulate income. The rule places restrictions on the period of time during which income may be accumulated. The Law Commission found that there was no longer a sound policy basis for restricting settlors’ ability to direct or allow for the accumulation of income, except in the case of charitable trusts. The Bill would therefore abolish the current rule for all non-charitable trusts. Charitable trusts would, however, be subject to a limit of either a 21 year period or the life of the settlor.
The Bill is the first to be considered under a new House of Lords procedure for Law Commission bills and would implement, with minor modifications, the recommendations of a 1998 Law Commission report on the rule against perpetuities and the rule against excessive accumulations. The rule against perpetuities sets a time limit, known as the perpetuity period, within which dealings with property which are to take effect in the future (such as a gift to a child who is not yet born) must occur. The Law Commission report considered that the application of the rule is now too wide: it applies, for example, to many commercial dealings which have nothing to do with the family settlements that the rule was designed to control. Moreover, it found that the existence of multiple methods for calculating the perpetuity period is complex and confusing. The Bill defines the circumstances in which the rule would apply. In general terms, it would only apply to rights under trusts. Other property rights would no longer be subject to the rule. Where the rule does apply, the perpetuity period would be 125 years. This period would generally apply prospectively only. The rule against excessive accumulations applies where a disposition carries a duty or a power to accumulate income. The rule places restrictions on the period of time during which income may be accumulated. The Law Commission found that there was no longer a sound policy basis for restricting settlors’ ability to direct or allow for the accumulation of income, except in the case of charitable trusts. The Bill would therefore abolish the current rule for all non-charitable trusts. Charitable trusts would, however, be subject to a limit of either a 21 year period or the life of the settlor.