Perpetuities and Accumulations |
|
| |
|
| Layman’s guide to terminology |
|
| Just in case you do not want to labour with a dictionary, we provide this short glossary of legal terms we simply cannot avoid using. |
|
| |
|
| “Interest” |
Means, roughly “ownership” |
| “Vests” |
Means, roughly “becomes yours” - or his, or hers, or whatever, for certain. For example, your groceries vest in you when you have paid for them because your contract to buy them is complete. Your new house vests in you and any other person named in the transfer when you have delivered the purchase money to the buyer and taken up a signed transfer. There is a further example below. |
| “Disposition” |
means a change in the entitlement to goods or real property – such as a gift or sale |
|
|
|
| |
|
| Background law |
|
| Under common law, the basic principal was that no interest in property was recognised unless it vested not later than twenty-one years, plus the period of gestation, after the end of some life or lives “in being” which existed at the time of the creation of the interest. For example, a provision in a will that money be accumulated and paid to “all of my great grandchildren who exist 50 years after my death” was void, although a similar provision: to “all of my great grandchildren who exist 20 years after the death of my grandson Peter” was not only valid, but may have permitted accumulation for far longer, since Peter may have still been alive 70 years after “my” death. |
|
| |
|
| The courts developed this rule during the seventeenth century in order to restrict a person's power to control perpetually the ownership and possession of his or her property after death and to ensure the transferability of property. The rule includes the period of gestation was added to cover cases of birth after the death of the testator. |
|
| |
|
| A property interest vests when it is given to a person in being (someone who is currently living). For example, if Donald Smith transfers his real property to his son Howard for life and then to Howard's children who are alive at the time of Howard's death, the children's interest has not vested. Their interest is subject to the condition precedent that they survive their father Howard. If Donald transfers his property to his son Howard for life, and then to Howard's children Ann and Richard, the children's interest is vested. Although the children's right to possess and enjoy the property might be delayed for many years, the rule does not relate to the time when property vests in actual possession but only when the property vests in interest. The interest that the children possess is known as a future interest. |
|
| |
|
| Under the rule, a future interest must vest within a certain period of time. This period is limited to the duration of a life or lives in being (the "measuring lives") at the time the interest in the property is transferred, plus twenty-one years. |
|
| |
|
| New ”law" |
|
| This area of law is now governed by The Perpetuities and Accumulations Act 1964. |
|
| |
|
| A disposition is no longer invalid merely because it might conceivably vest outside the perpetuity period. A person who would otherwise be entitled to a disposition can claim it by showing that it did, in fact, vest within the period. This saves beneficiaries who might otherwise have found their legacies invalidated, for example, because of the remote possibility that one of their widowed grandparents might remarry a person 60 years their junior. |
|
| |
|
| The Act sets out what constitute `lives in being', where no time period is specified. Essentially these are the lives of the person making the will and the beneficiaries, and certain family members. |
|
| |
|
| Where previous law would be invoked to reduce the qualifying age of a beneficiary to 21, to bring it within the perpetuity period, the 1964 Act now reduces the age by the minimum necessary to bring it within scope, not automatically to 21. |
|
| |
|
| The final major change disposes of the `fertile ancients' and `precious infants' anomalies, by setting age ranges outside of which a person is considered infertile. For men, fertility begins at 14; for women, it begins at 12 and ends at 55. |
|
| |
|
| In short, the law continues to limit the period for which property can be held in trust without coming into somebody's absolute ownership. The rule against perpetuities has been changed by statutory modification, but the philosophy behind it remains the same. |
|
