What the Rule Against Perpetuities Actually Does
The rule against perpetuities prevents property from being locked up indefinitely. Without it, a trust or other arrangement could control property forever. That would keep assets out of productive use and tie the hands of future generations. Arizona's version gives estate planners significant flexibility while still setting an outer boundary.
A nonvested property interest is invalid unless at least one of the following is true: 1. At the time the interest is created it is certain to vest or to terminate not later than twenty-one years after the death of a person who is then alive. 2. The interest either vests or terminates within five hundred years after its creation.
A.R.S. § 14-2901(A)Arizona offers three paths to validity. The traditional common law approach requires vesting within 21 years of a measuring life. The modern alternative allows up to 500 years. A third option applies when the trustee has the power to sell trust assets and certain beneficiaries can terminate the interest.
How This Applies to Powers of Appointment
The statute also covers powers of appointment. These allow one person to decide who ultimately receives trust property. A general power of appointment that depends on a condition being met must satisfy the same time limits. Nongeneral and testamentary powers of appointment follow similar rules.
A general power of appointment that is not presently exercisable because of a condition precedent is invalid unless any of the following is true: 1. At the time the power is created the condition precedent is certain to be satisfied or becomes impossible to satisfy no later than twenty-one years after the death of a person who is then alive. 2. The condition precedent either is satisfied or becomes impossible to satisfy within five hundred years after its creation.
A.R.S. § 14-2901(B)For most families creating a trust, the 500-year window provides more than enough room. The key takeaway is that Arizona allows long-term planning without the rigid constraints of the old common law rule. However, it does not allow trusts to last forever.