Trust Law/Level V · Tax and legacy/5.3 Generations and charity/Lesson 3
Rule against perpetuities and its abolition
The old limit on how long the dead can control property, and why many places have loosened it
Education, not legal advice. Trust law changes from country to country and state to state, and the right structure depends on your situation. Anything you sign should be drafted or reviewed by a qualified lawyer where you live.
The lean path
The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.
- Before drafting a long trust, check the governing state’s period: under the Uniform Statutory Rule an interest is valid if it actually vests within 90 years, and a savings clause ending the trust before the deadline costs nothing and prevents a gift failing.
- A family wanting a very long trust can often use another state’s law by naming a trustee there: South Dakota declares the common-law rule not in force (SDCL 43-5-8) and Nevada allows 365 years; that trustee’s fees continue for the trust’s whole life.
- In England and Wales, most instruments taking effect from 6 April 2010 get a single 125-year perpetuity period under the Perpetuities and Accumulations Act 2009, so no lives-in-being counting is needed; older instruments follow the earlier rules.
- A long trust is not automatically free of transfer tax: GST exemption, $15,000,000 per person in 2026, must be allocated to give a zero inclusion ratio, or a 40% GST tax applies as later generations benefit.
MaterialsA sheet of paper to draw a family tree across three generationsYour state’s or country’s rule on how long a private trust may lastA timeline marked in 21-year and 90-year steps
Wonder
- Should someone who died a century ago still decide who gets the family land?
- Why would a court strike down a gift that might never cause any harm?
- If a trust can last forever, who keeps it honest?
Explore
- The rule against perpetuities limits how far into the future a gift can be postponed. English courts developed it to stop landowners tying up property for generation after generation, which kept land off the market and let the dead rule the living. It began with the Duke of Norfolk’s Case (1682), which accepted a gift that would vest within a life then living but signalled that longer delays would not be allowed. Over the next 150 years the courts worked out exactly where the line was.
- The classic period was settled in Cadell v Palmer (1833): lives in being plus 21 years. In the American scholar John Chipman Gray’s 1886 formulation, no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. The test was strict. A gift failed if there was any possibility, however remote, that it could vest too late, even if in practice it almost certainly would not.
- That strictness produced famous absurdities. In Jee v Audley (1787), a gift failed partly because the law presumed that a couple in their seventies could still have more children; textbooks call this the ‘fertile octogenarian’. Other puzzles involved an ‘unborn widow’ who might be born after the gift was made. Because careful lawyers could fall into these traps, the rule became known as one of the hardest in property law, and many trusts included a ‘savings clause’ to end the trust before the deadline.
- Reform came in two waves. The first replaced ‘might vest too late’ with ‘wait and see’: courts look at what actually happens. The Uniform Statutory Rule Against Perpetuities (1986), adopted in many US states, lets an interest stand if it actually vests within 90 years. In England and Wales, the Perpetuities and Accumulations Act 1964 introduced wait-and-see, and the Perpetuities and Accumulations Act 2009 set a single fixed perpetuity period of 125 years for most instruments taking effect from 6 April 2010.
- The second wave went further. South Dakota abolished the rule for trusts in 1983 if the trustee holds a power to sell the property, and several other states followed with abolition or very long periods; Nevada, for example, allows trusts to last 365 years, and Delaware abolished the rule for personal property in trusts. These changes are what make long-lasting dynasty trusts possible (lesson 5.3.1), and they attracted trust business to those states.
- The change has critics as well as supporters. Supporters say families should be free to plan for descendants and that modern trusts are well regulated. Critics argue that trusts lasting centuries concentrate wealth, entrench control by people long dead, and become hard to administer as beneficiaries multiply. Where the rule still applies, it can still invalidate badly drafted gifts, so the length of a trust and the law that governs it are among the first questions in any long-term plan.
Key facts
- The rule against perpetuities began with the Duke of Norfolk’s Case (1682).
- Cadell v Palmer (1833) settled the classic period: lives in being plus 21 years.
- Jee v Audley (1787) is the source of the ‘fertile octogenarian’ problem.
- The Uniform Statutory Rule Against Perpetuities (1986) uses a 90-year wait-and-see period.
- England and Wales: the Perpetuities and Accumulations Act 2009 set a 125-year period for most instruments from 6 April 2010.
- South Dakota abolished the rule for trusts in 1983 where the trustee has a power of sale; Nevada allows 365 years.
Exercise nine, six, three, one
9CollectGather 9 reasons a person might want property held in trust for a very long time, and reasons others might object.
6ClusterSort the 9 into 6 groups: family security, control by the dead, tax planning, keeping property in use, fairness between generations, and administration over time.
3DistillReduce the 6 groups to 3 questions a law should answer when it decides how long a trust may last.
1CrystallizeWrite 1 sentence on how long you think a private trust should be allowed to last, and why.
Fact check
Dates, figures and claims checked against the published sources listed below.