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09 Mar 2010

New trust legislation offers flexibility and will benefit future generations, says law firm Boodle Hatfield

Trusts are still a very popular vehicle for holding and managing wealth and new legislation that comes into force next month will provide increased flexibility and will be of particular benefit to those creating new long-term trusts to benefit future generations, says law firm Boodle Hatfield.
 
The Perpetuities and Accumulation Act 2009 comes into force on 6 April 2010 and lifts the restriction on the accumulation of trust income, which is currently restricted to just 21 years in most cases. From 6 April, new trusts will be permitted to roll up trust income throughout the lifetime of the trust, with no requirement for the trustees to distribute income to the beneficiaries.
 
Emma Haley, a solicitor in the Private Client and Tax department at law firm Boodle Hatfield said: “This piece of legislation brings English trust law up-to-date and more in line with trusts available in other jurisdictions.
 
“As well as allowing trusts to accumulate income, the lifetime of a trust has been expanded from 80 to 125 years.  This means that new trusts can be run on a more flexible basis to benefit successive generations for longer.”
 
The new legislation does not however apply to existing trusts, effectively creating two different systems, which will undoubtedly cause some confusion.
 
Emma warns: “It is quite common for people to leave property in trust in their Will, yet the new legislation will only apply to Wills executed on or after the 6 April and not to Wills already made, even if they come into effect after 6 April on the date of death.
 
“People who have Wills that contain a trust may wish to consider making a new Will that takes advantages of the unrestricted power of accumulation and the longer perpetuity period.”
 
The Perpetuities and Accumulation Act 2009 is the first piece of legislation to be passed through the new fast track process for uncontroversial Law Commission Bills.

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