UK: Perpetuities And Accumulations Act 2009 Update

This act became fully operative on 6 April 2010. 


Its chief impact is that all wills and trusts executed after 6 April 2010 have a perpetuity period of 125 years, as opposed to the previous maximum of 80 years. 


The accumulation period, previously limited to 21 years, also increases to 125 years,thus avoiding  the situation where income must be distributed to inappropriate or immature beneficiaries, rather than accumulated with capital. A shorter perpetuity and accumulation period may still be chosen if appropriate.


The relevant periods for trusts already in existence remain unchanged. There is a provision in the Act, however, which allows trustees to execute a deed extending the perpetuity period to 100 years where there is uncertainty as to when the perpetuity period stipulated in the trust deed will end -  typically  where the perpetuity period is defined by reference to 'lives in being'.


Although the Act is silent on the point, it appears that the execution of a codicil which 'republishes' a will, will allow the new, extended perpetuity and accumulation periods to apply, although specific drafting will be needed in order to deal with the limitations on the perpetuity period and accumulations which will already be in the will. However, if a new trust is created by the exercise of a power of appointment, the new trust or sub-trust will have the same perpetuity period as the original trust containing the power.


The extension of the perpetuity and accumulation periods for UK trusts may make the UK a more favourable trust jurisdiction than previously. However, even these extended periods are more limited than the position in many offshore jurisdictions where perpetuity periods have been abolished entirely, effectively allowing assets to be tied up in trust indefinitely.


Charitable trusts are still governed by the old rule because it was deemed contrary to public interest to allow charities to accumulate income indefinitely