Transfer of Property Act Section 17 — Direction for accumulation

CHAPTER I PRELIMINARY

General

Summary

If a property transfer says the income from that property must be saved and reinvested (accumulated), that instruction is only valid for a limited time. The maximum allowed period is either the lifetime of the person giving the property, or 18 years from the date of the transfer, whichever is longer. If the instruction tries to force accumulation beyond that limit, the instruction is invalid for the extra time, and once the allowed period ends, the property and its income are treated as if the accumulation period had already finished.

However, this rule does not apply to certain specific purposes. You can still direct income to be accumulated if it is meant to pay off debts of the giver or someone with an interest in the property, to provide financial support (portions) for children or more distant descendants of the giver or such a person, or to preserve and maintain the transferred property itself.

Official Text

(1) Where the terms of a transfer of property direct that the income arising from the property shall be accumulated either wholly or in part during a period longer than—

(a) the life of the transferor, or

(b) a period of eighteen years from the date of the transfer, such direction shall, save as hereinafter provided, be void to the extent to which the period during which the accumulation is directed exceeds the longer of the aforesaid periods, and at the end of such last-mentioned period the property and the income thereof shall be disposed of as if the period during which the accumulation has been directed to be made had elapsed.

(2) This section shall not affect any direction for accumulation for the purpose of—

(i) the payment of the debts of the transferor or any other person taking any interest under the transfer, or

(ii) the provision of portions for children or remoter issue of the transferor or of any other person taking any interest under the transfer, or

(iii) the preservation or maintenance of the property transferred; and such direction may be made accordingly.