Tuesday, March 31, 2015


SECTION 2-904. EXCLUSIONS FROM STATUTORY RULE AGAINST PERPETUITIES. Section 2-901 (statutory rule against perpetuities) does not apply to:
(1) a nonvested property interest or a power of appointment arising out of a nondonative transfer, except a nonvested property interest or a power of appointment arising out of
(A) a premarital or postmarital agreement,
(B) a separation or divorce settlement,
(C) a spouse’s election,
(D) a similar arrangement arising out of a prospective, existing, or previous

marital relationship between the parties,
(E) a contract to make or not to revoke a will or trust,

(F) a contract to exercise or not to exercise a power of appointment, (G) a transfer in satisfaction of a duty of support, or
(H) a reciprocal transfer;

(2) a fiduciary’s power relating to the administration or management of assets, including the power of a fiduciary to sell, lease, or mortgage property, and the power of a fiduciary to determine principal and income;
(3) a power to appoint a fiduciary;
(4) a discretionary power of a trustee to distribute principal before termination of a trust to a beneficiary having an indefeasibly vested interest in the income and principal;
(5) a nonvested property interest held by a charity, government, or governmental agency or subdivision, if the nonvested property interest is preceded by an interest held by another charity, government, or governmental agency or subdivision;
(6) a nonvested property interest in or a power of appointment with respect to a trust or other property arrangement forming part of a pension, profit-sharing, stock bonus, health, disability, death benefit, income deferral, or other current or deferred benefit plan for one or more employees, independent contractors, or their beneficiaries or spouses, to which contributions are made for the purpose of distributing to or for the benefit of the participants or their beneficiaries or spouses the property, income, or principal in the trust or other property arrangement, except a nonvested property interest or a power of appointment that is created by an election of a participant or a beneficiary or spouse; or
(7) a property interest, power of appointment, or arrangement that was not subject to the common-law rule against perpetuities or is excluded by another statute of this state.
This section lists the interests and powers that are excluded from the Statutory Rule Against Perpetuities. This section is in part declaratory of existing common law but in part not. Under paragraph (7), all the exclusions from the common-law Rule recognized at common law and by statute in the state are preserved.
The major departure from existing common law comes in paragraph (1). In line with

long-standing scholarly commentary, paragraph (1) excludes nondonative transfers from the Statutory Rule. The Rule Against Perpetuities is an inappropriate instrument of social policy to use as a control of such arrangements. The period of the Rule – a life in being plus 21 years – is suitable for donative transfers only, and this point applies with equal force to the 90-year allowable waiting period under the wait-and-see element of Section 2-901. That period, as noted, represents an approximation of the period of time that would be produced, on average, by tracing a set of actual measuring lives and adding a 21-year period following the death of the survivor.
Certain types of transactions – although in some sense supported by consideration, and hence arguably nondonative – arise out of a domestic situation, and should not be excluded from the Statutory Rule. To avoid uncertainty with respect to such transactions, paragraph (1) lists and restores such transactions, such as premarital or postmarital agreements, contracts to make or not to revoke a will or trust, and so on, to the donative-transfers category that does not qualify for an exclusion.
Reference. Section 2-904 is Section 4 of the Uniform Statutory Rule Against Perpetuities (Uniform Act). For further discussion of this section, with examples illustrating its application, see the Official Comment to Section 4 of the Uniform Act. 

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