Perpetuity

Question 1

Trusts as temporary arrangement?

Answer 1

• Trust cannot be permanent – temporary way of dealing with property
• Express perpetuity clauses – often trust instrument contains rule dealing with how and when the trust is brough to an end.
• A well drafted trust instrument will ensure that the trustees have a mechanism of disposing of any trust property that remains at the end of this period.

Question 2

Legal perpetutiy rules?

Answer 2

Rule against remoteness of vesting
- A person must obtain a vested interest in the trust property within a recognisable perpetuity period.
- Any interest under a trust which does not vest within the statutory perpetuity period is void. 125 YEARS
- Wait and see rule exists
- Example – for equal distribution amongst members of indeterminate class – class closing rules apply to limit the class of beneficiaries.

Question 3

Rule against inalienability? COMMON LAW RULE - NO LONGER RELEVANT ONLY TO NON-CHAIRTABLE TRUST?

Answer 3

• Remains relevant to non-charitable purpose trust
• Applied strictly – must be certain at the time the trust is created that it will come to a need, otherwise will be void. Always include express perpetuity clause.
• A life in beinf plus 21 years