Trust 7 Perpetuity

Question 1

Can trusts be permanent arrangements?

Answer 1

only charitable purpose trusts

Question 2

What are the two rules to prevent perpetuity?

Answer 2

• remoteness of vesting (people or charities)
• rule against inalienability (non-charitable purpose trusts)

Question 3

What is the Statutory rule against remoteness of vesting?

Answer 3

a person must obtain a vested interest within 125 years

Question 4

What happens if the Statutory rule against remoteness of vesting is breached?

Answer 4

the trust will become void at the time of breach

Question 5

What happens to the trust before the Statutory rule against remoteness of vesting is breached?

Answer 5

trust still valid - can wait and see

Question 6

Does the Statutory rule against remoteness of vesting apply to non-charitable purpose trusts?

Answer 6

No

Question 7

What is the Common Law rule against inalienability?

Answer 7

non-charitable purpose trust cannot exceed a life + 21 years

Question 8

From what time does the Common Law rule against inalienability apply?

Answer 8

From creation of the trust. It must be certain from the creation of the trust that it will come to an end before the perpetuity period of a life + 21 years.

Question 9

What happens if the Common Law rule against inalienability is breached?

Answer 9

The trust is void - the ‘wait and see’ rule does not apply.

Question 10

What trusts does the Common Law rule against inalienability apply to?

Answer 10

Non-charitable purpose trusts

Question 11

What happens if a non-charitable purpose trust has a perpetuity period that might exceed the lifetime +21 year limit?

Answer 11

It will fail. Unlike the 125 year rule, the 21 year limit is not a “wait and see”, it fails immediately.