The Rule against Perpetuities:

The rule against perpetuities is a legal rule which means that any trust can only exist for a predetermined timeframe, being 80 years. Any trust that purports or attempts to last for a longer period of time is void. The exception to this rule is for trusts created with charitable objects. All jurisdictions except South Australia have retained a rule against perpetuities, otherwise known as the rule against remoteness of vesting. Depending on the state which has jurisdiction over the trust deed, there may be a statutory law or a common law regime that determines the perpetuity period. In the Australian Capital Territory and New South Wales, the common law rule has been abrogated and a statutory rule applies. Thorough and detailed advice from a qualified and experienced Asset Protection and Trusts Lawyer can greatly assist in structuring your trust deed in reference to this rule.

The original rationale for a rule against perpetuities was to limit attempts by landowners to restrict free alienation of land. Today, the most important justification for retention of a rule against perpetuities is to limit the settlor’s or testator’s control of assets to a reasonable period following the date of disposition. The rule against perpetuities strikes a balance between the wish of the owner of property to govern its devolution and the wish of succeeding generations who have a claim to the property to control its use and alienability. At common law, the modern rule against perpetuities, is that no interest is good unless it must vest, if at all, no later than 21 years after the death of a life in being who is alive at the creation of the interest. At common law, an interest is void from the outset if it may possibly vest outside the perpetuity period, such question being determined having regard to circumstances existing at the commencement of the period. It is not possible at common law, in the absence of legislative intervention, to ‘wait and see’ whether the rule is in fact offended by events as they actually turn out. Thorough and detailed legal advice in the complex area of trusts law may be of great value in ensuring your trust structure has a sufficient life, and if not, a subsequent trust deed should be arranged.

The common law rule against perpetuities has been modified by legislation in all jurisdictions, except South Australia where the rule has been abolished. The most significant reform to the common law in all jurisdictions where legislative intervention has occurred has been the introduction of a ‘wait and see’ provision. The legislative amendments to the rule affect both gifts to individuals and class gifts. A qualified Asset Protection and Trusts Lawyer may have regard to your circumstances and advise you if you are affected by this rule.

Gifts are generally to be construed according to the usual principles of construction before consideration is given to whether or not they offend the rule against perpetuities. A gift should not be construed otherwise than according to its natural meaning in order to avoid infringing the rule against perpetuities. However, if a gift admits of two possible interpretations one of which infringes the rule against perpetuities, but that are otherwise of equal validity, the court may adopt the non-infringing construction. Having an experienced Asset Protection & Trusts solicitor who may be able to consider your circumstances may be beneficial to advise you in this regard.

If you need further legal advice on your trusts matter, you may book an appointment with us by telephone on (02) 9233 4048 or by email to info@navado.com.au. 

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