Trust Law: The Rule Against Perpetuities (RAP)

This is a common law English principle that prevents someone from controlling property from the grave forever and provided that a property interest must vest (that is, fully belong to someone) no later than 21 years after the death of an identifiable person who was alive at the time the transfer was created. If it vests too late, the rule kills the transfer.

The rule has been simplified so rather than using the above “life in being plus 21 years” formula, most modern trusts set out a fixed statutory perpetuity period as follows:

80-Years in Victoria, New South Wales, and Western Australia.

• 125-Years in Queensland from 1 August 2025.
• South Australia abolished the rule, allowing trusts to exist indefinitely, though courts can still order a trust to be wound up after 80 years if a beneficiary requests it.

The above periods are fixed maximum periods during which trust property must “vest” (be distributed or definitively owned). The rule is set out in the aptly called Perpetuities and Accumulations Act 1968 (Vic)

The common law rule against perpetuities provided that if there was even a tiny, theoretical chance a gift might vest too late, it was immediately void when the trust is created. This has been varied so that a trust is not considered invalid at the start, just because it could last too long. You now “wait and see” at the end of the period, to see if the property actually vests and if it does the gift is valid.

When a trust reaches the end of its perpetuity period, it must “vest” (the “Vesting Date” or “Termination Date”) and on that date the trustee must distribute all trust assets to the beneficiaries which can then trigger Capital Gains Tax (CGT) and stamp duty liabilities as the legal ownership changes from the trustee to the beneficiaries.

It should be noted that Superannuation Funds are in most states exempt and they can hold assets for members over very long periods as can Charitable Trusts which can exist forever.