Wednesday, April 13, 2016

Alberta Law Reform Institute Report for Discussion Perpetuities Law: Abolish or Reform?

The Alberta Law Reform Institute has published a report for discussion entitled Perpetuities Law: Abolish or Reform?
"The rule against perpetuities (RAP) was developed by English courts in the 17th century as a way to prevent landowners from using future and contingent interests to tie up property for generation after generation. RAP seeks to control the creation of future, contingent interests in property which may vest outside of the specified perpetuity period. The perpetuity period is measured with reference to any life or lives in being that are in existence at the creation of the interest, plus 21 years. If, at the date that the disposition takes effect, it is not certain that the contingent interest will vest within the perpetuity period, then the interest will be considered void at the outset. RAP was received law from England and became part of the law of Alberta."

"Over the centuries the courts expanded RAP with the result that it now applies to virtually all future or contingent interests in property, regardless of whether the interest is real, personal, legal or equitable. RAP and its expansion have resulted in a complex and virtually incomprehensible body of law that is often misapplied and misunderstood (...)"

"Does perpetuities law serve any valid legal or social purpose in today’s society? It seems to be well accepted that the historical purpose of preventing wealthy landowners from creating successive family estates is not relevant in Canada. However, many view the modern purpose of perpetuities law as creating a balance between past and present, so that a settlor or testator may dictate the disposition of his or her property, but may not control it so far into the future that the beneficiaries cannot appropriately respond to changed times and circumstances. Similarly, restricting how far into the future a settlor or testator can control his or her property may benefit society by ensuring that property is used to meet contemporary needs, rather than outdated ones (...)"

"Choosing to retain perpetuities law does not necessarily mean that the Perpetuities Act should continue to govern in its current form. Three potential reform models are presented and discussed:
  • Perpetuities law should allow a choice between RAP’s perpetuity period calculated by reference to lives in being and a fixed perpetuity period for vesting, but should retain the wait and see principle.
  • RAP should be codified, the concept of lives in being should be eliminated, a fixed perpetuity period for vesting should be implemented, and the wait and see principle should be retained.
  • RAP, lives in being, vesting and the wait and see principle should be completely replaced with a legislated, fixed duration period for trusts."
The report discusses the situation in Alberta as well as the practices adopted in Manitoba, Nova Scotia, Saskatchewan, England and New Zealand.

This is a discussion paper. The deadline for submitting comments is June 30, 2016.

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posted by Michel-Adrien at 7:02 pm


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