Rule Against Accumulations of Income

Associate Professor of Law Robert Sitkoff of the Northwestern University School of Law has recently posted an thoughtful article entitled The Lurking Rule Against Accumulations of Income.

Here is the abstract of Prof. Sitkoff’s article as posted on SSRN:

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, the rule against accumulations of income, limits the time during which a settlor may direct the trustee to accumulate and retain income in trust to the applicable perpetuities period. 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. With the erosion of the Rule Against Perpetuities, however, the rule against accumulations of income may have newfound relevance. Perpetual trusts are more likely than ordinary trusts to involve accumulations of income, and such trusts are designed to endure beyond the traditional perpetuities period. This essay examines the lurking rule against accumulations of income and its potential impact on the rise of the perpetual trust. The essay closes with normative reflections on the policy soundness of the rule against accumulations.