Pennsylvania Abolishes Rule Against Perpetuities

Last week, Pennsylvania enacted legislation that among other things abolishes the rule against perpetuities for interests created after December 31, 2006 (the link is to the Senate bill; the Governor approved the bill on July 7).  The legislation amends several code sections, but the following captures the essence of the bill:

20 PSA  § 6107.1.  Applicability of rule against perpetuities.
    (a)  Traditional rule.--Sections 6104 (relating to rule against perpetuities), 6105 (relating to rule against perpetuities; disposition when invalidity occurs), 6106 (relating to income accumulations; when valid) and 6107 (relating to income accumulations; disposition when invalidity occurs):
         (1)  shall apply to every interest created before January 1, 2007; but shall not apply to any interest created after December 31, 2006.
   (b)  Modern rule.--All of the following apply to every interest created after December 31, 2006:
        (1)  No interest shall be void as a perpetuity.
        (2)  No direction or authorization to accumulated income shall be void as a perpetuity.

As a result, Pennsylvania will retain its wait-and-see approach to the RAP for interests created before January 1, 2007, but will have no RAP for interests created January 1, 2007 or after.  The practical impact will be that specialists in trust litigation and related matters will need to know the RAP, but that the average practitioner drafting wills and trust documents in Pennsylvania will not need to worry about it.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]