6. The Rule Against Perpetuities Flashcards
Definition of the Rule:
No interest is valid if it could vest later than any life in being at the time of the creation of the interest, plus 21 years.
When is an interest vested?
An interest is vested when there is no condition that has to be satisfied, and the exact identity of the taker is known.
What is NY’s perpetuities reform statute?
It automatically reduces all age contingencies to 21 years, thus saving the gift.
John conveyed Blackacre to his son Ralph for life, remainder to the first of Ralph’s children to reach thirty. Does the gift over to the first of Ralph’s children to reach thirty violate the Rule Against Perpetuities?
On the New York essays the answer is no because of the New York RAP reform statute automatically reduces all age contingencies to 21.
John conveyed Blackacre to the First National Bank, in trust, to pay the income to my grandson Ronald for life, and then to pay the principal to any child of Ronald who reaches thirty.
Does the principal interest in a child of Ronald who reaches thirty violate
RAP?
On the New York essays the answer is no because of the New York RAP reform statute automatically reduces all age contingencies to 21.
The NY Rule against Suspension of the Power of Alienation:
Any interest is void if it suspends the power of alienation for a period longer than lives in being plus 21 years, that is, when there are no persons who could, together, transfer fee simple title.
Suspension of alienation is a concern when:
- Spendthrift income interests are in the trust (quite considerable given New York’s automatic spendthrift protection when trust is silent about income alienation); OR
- A life estate is created in an unborn person, or in an open class that may possibly include unborn persons.
O to A and his heir(s) so long as no liquor is consumed on the premises, and if liquor is ever consumed then to B and her heir(s).
- Is the suspension of alienation rule violated by this grant?
- Does the gift over to B violate RAP?
- No, because A and B together could agree to transfer a fee simple within their own lifetimes plus 21 years.
- Yes, because the vesting in B’s interest might take place beyond the RAP period of A and B’s lifetimes plus 21 years.
Judith created a trust that provided income to her sister Jane for life, then on Jane’s death to pay the income to Jane’s children for their respective lives, then remainder to Bob. At Judith’s death Jane, who is thirty (30) years old, has one child, Jed.
Is the Suspension Rule violated?
Yes, because upon creation of the trust Jane could not join the other beneficiaries to transfer a fee simple absolute, since the class gift to Jane’s children includes potential unborn children who cannot presently in their unborn state, consent to join in a transfer of a fee simple absolute, (and who will not have a life in being to validate the duration of their spendthrift income interest). As a result, the income interest in Jane’s children is void and the Remainder will go to Bob immediately upon Jane’s death which is when her own income interest terminates.
