Thursday, July 13, 2017
Ian Murray recently published an Article entitled, Accumulation in Charitable Trusts: Australian Common Law Perpetuities Rules, Wills, Trusts, & Estate Law eJournal (2017). Provided below is an abstract of the Article:
This article explores the application of perpetuities rules to the accumulation of income by charitable trusts, focusing on the Australian jurisdictions in which relevant statutory accumulation constraints have been abolished. Recent work by Sitkoff and Horowitz in the context of United States perpetual testamentary family trusts demonstrates that perpetuities rules can be easily overlooked, with adverse consequences for accumulation validity and potential breach of duty by trustees. Neglect of perpetuities rules poses the risk of similar consequences for Australian charitable trusts, which is a significant issue, given the large number of such trusts and the substantial quantum of assets that they hold. Accordingly, the article considers whether abolition of statutory constraints against accumulation permits unfettered accumulation by charitable trusts or whether underlying common law perpetuities restraints apply and, if so, whether those restraints preclude accumulation. It is asserted that the common law rules do not apply in South Australia and that while there is an argument that they apply to charitable trusts in Tasmanian and the Northern Territory, the better view is that they do not restrict charitable trust accumulation. Nevertheless, the level of risk that the perpetuities rules preclude accumulation, with consequences for the destination of the accumulated income and breach of trustee duties, varies between Australian jurisdictions. The analysis therefore concludes by considering the potential impact of this varying risk level on present practice.
Special thanks to Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law School) for bringing this article to my attention.