The Perpetuities and Accumulations Act 2009
The Perpetuities and Accumulations Act 2009 will come into force on 6 April 2010. The Act introduces long awaited changes to simplify and modernise the existing rules governing perpetuity periods and the permitted periods for accumulating income.
The Act provides that private trusts created by instruments which take effect on or after the Act comes into force, referred to as “post-commencement” instruments, will have a set perpetuity period of 125 years. The rules against excessive accumulations will also be abolished for such trusts, so that trustees will be able to accumulate income within the trust for the entire perpetuity period. The new rules will apply regardless of any express provision to the contrary in the trust document itself.
Practitioners will need to be able to recognise which trusts are governed by the new rules and which by the old. All lifetime trusts take effect when they are executed and therefore any lifetime trust executed on or after 6 April 2010 will be governed by the new rules.
Trusts created by wills executed before 6 April 2010 will be governed by the old rules, even when the testator dies after 6 April 2010. The position is slightly more complex where Codicils have been executed after 6 April 2010 to Wills executed prior to that date. In those circumstances the rules governing any trust created by the Will or Codicil will depend on whether the Codicil is deemed to have republished the Will. If the old rules are to apply the Codicil should confirm that it is not intended to republish the Will. If the new rules are to apply it would be advisable to prepare a new Will to ensure there is no question as to which rules apply.
Reviewed in 2015