As discussed in the Withers LLP Stop Press circulated on 20 November 2009, the Perpetuities and Accumulations Act 2009 (the 'Act') will radically alter the length of time that assets can be held in UK trusts.
On 5 January 2010, Parliament confirmed that the Act will come
fully into force on 6 April 2010.
The principal impact of this will be that all wills and trusts
executed after 6 April 2010 will have a perpetuity period of 125
years, as opposed to the current maximum of 80 years. The
accumulation period, currently limited to 21 years, will also be
increased to 125 years. This will avoid the situation whereby
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 will be
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. This will typically be the
case 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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
