Reports on the Rule against Perpetuities and Variation of Trusts.

By Órla Gillen, Wednesday, 21st March 2001 | 0 comments
Filed under: 2000.



Press Release

Out with the old...Law Reform Commission publishes twin Reports on the Rule against Perpetuities and Variation of Trusts.

In twin Reports, launched today, the Law Reform Commission  seeks to modernise the law in relation to trusts, and to remove an ancient but arbitrary trap in this area of the law.

In its Report on Variation of Trusts, the Law  Reform  Commission  addresses  the  practical problems which can arise where trustees' powers turn out to be outdated, overly restricted or inadequate. Frequently, it becomes clear that certain necessary  powers,  which should have been included in the document setting up the trust, have been unintentionally omitted. Examples include the power to sell land or other  assets,  the power to continue running a business, investment powers or the power to delegate if a trustee is going abroad. Furthermore, the terms of the trust may be wholly inadequate to cope with unanticipated changes in family circumstances, such as an early death or the need to make financial provision for a child with a disability.

At present the courts are unable to respond to these problems, save in four very narrow scenarios. The Report, and its appended draft legislation, significantly widens the jurisdiction of the court and allows for court approval to variations in circumstances not currently catered for. Jurisdiction will be conferred on the High Court, but to ensure that this facility is accessible and cost-efficient, the Commission has also recommended that the Circuit Court be given jurisdiction  in relation to smaller trusts.

Turning to the separate but related Report on the Rule against Perpetuities and Cognate Rules,  it recommends  the  abolition  of  one of the  law's  oldest,  but  most  troublesome, rules. The Rule against Perpetuities dates from the seventeenth century, with even earlier antecedents. It was devised to curb a feudal fondness for controlling  property  from beyond the grave, or "dead-hand" control as it is sometimes called. While this basic objective is not unreasonable, the practical effect of the Rule in the present day differs radically from its purpose. The Report demonstrates the Rule's propensity  unexpectedly  to strike down perfectly reasonable family gifts, and to frustrate harmless commercial arrangements.

To make matters worse, the Rule is unhappily phrased, the effect of which is twofold. First, the Rule applies arbitrarily in that it catches gifts for odd reasons which have  nothing to do with their potential to drag on for years. Secondly, with clever drafting, the Rule is very easily side-stepped.

A certain amount of common ground exists between these two Reports. The possibility exists that, once the Rule against Perpetuities is swept away, some troublesome  long trusts will become perfectly valid, when they would otherwise have been defeated by the Rule. In the few cases where this might occur, the facility provided by Variation of Trusts legislation will tidy up any persisting problems. This will, the Commission states, be "a more finely tuned and comprehensive response to these concerns than the Rule against Perpetuities which can, at times, be rather a blunt instrument."

Annexed to both Reports are draft Bills, which implement the recommendations set out in both Reports. The practice of drafting legislation is an innovation on the part of the Law Reform Commission and is designed to facilitate speedier implementation of its Reports.