The Rule Against Perpetuities is dying an ignoble death. To attract trust business and the lawyers' fees and trustees' commissions that come with it, twenty states have abolished the Rule as applied to interests in trust. But the Rule Against Perpetuities is not the only rule of property law that bears on trust duration. Another is the rule against accumulations of income, which limits the timeframe during which a settlor may direct the trustee to accumulate and retain income in trust. For 200 years, the rule against accumulations of income has lurked in the shadow of its older and more distinguished cousin, the Rule Against Perpetuities. But with the race to abolish the Rule Against Perpetuities, the rule against accumulations of income may have newfound relevance. Perpetual trusts are more likely than ordinary trusts to involve accumulations of income in trust. Accordingly, the task for this short essay is to examine the lurking rule against accumulations of income and its potential impact on the $100 billion perpetual trust industry.
Date of this Version
Robert H. Sitkoff, "The Lurking Rule Against Accumulations of Income" (May 2005). Law and Economics Papers. Working Paper 2.