I am dealing with a Settlement in a Deed of Variation in 1974 in which life interests have been appointed for grandchildren (all middle-aged adults). The perpetuity date in the deed is stated to be 50 years commencing with 22nd October 1974. Lewin on Trusts (17th ed. 2000) states “There is no point in specifying a shorter period than 80 years” but gives no authority. Does anyone have authority for this?
Do members also agree with my understanding that on the death of the life tenant, the capital must vest in ascertained beneficiaries (his children) absolutely? in this scenario, do the great-grandchildren have a vested reversionary interest now which they could sell on the market when they reach 18?
Ashby de la Zouch
I suspect Lewin just means that there is no practical advantage to be gained from a reduced perpetuity period.
All interests must have vested by October 2024, either in possession or reversion. If, on that date, any interests are subject to a contingency or can be diminished by further births, those interests are void for perpetuity. This is subject to the “wait and see” rule so any problems may be capable of rectification in the meantime by the exercise of powers of appointment/advancement or under Saunders v Vautier.
For the avoidance of doubt, the rule does not create a vested interest, it just voids any interest which fails to meet the rule.
Osborne Clarke LLP
That it is said life interests were appointed for grandchildren, I wonder if the settlement created under the variation was a discretionary trust. If so, then the trustees would have had the ability to terminate the trust at any time within the stated perpetuity period, so that even if an 80 year period, the trust could be terminated after 50 years, or any other time.
Why was a 50 period was chosen by the settlor – perhaps they wanted to see the capital vest during their own lifetime?
As regards vesting of interests, without knowing the actual wording of the trust any answer can only be speculation.
I have been involved with a couple of trusts over the years that had trust periods that were shorter than the maximum permitted, in both cases, prior to the end of the trust period, the trustees were advised to (and did subsequently) exercise their overriding powers so as to extend the trust period. The period specified in the deed/will may be shorter than the maximum allowed because the settlor had not wanted the trust to continue for longer than he considered appropriate - I have come across other cases where a settlor/testator wishes to specify a relatively short trust period.
This kind of issue has arisen in this context:-
- a settlement of 2003 with discretionary powers and a 125 year perpetuity /trust period.
- a power to appoint the trust fund to new trusts
- a new discretionary trust with a more limited selection of the beneficiaries.
Must we limit the new trust’s perpetuity period so that it cannot extend beyond the 2003 trust’s perpetuity period? Or can we simply have another 125 year period?
Yes, I stand corrected. It was 80 years in the 2003 deed.