9. Rule Against Perpetuities

Question 1

What is the rule under the Rule Against Perpetuities?

Answer 1

1) Perpetuities period begins to run at creation of interest
- Measuring lives used to show validity of that interest must be in existence at that time

2) Interest ‘will/will NOT’ (NOT ‘may’) vest within lives in being 21 years (and class closes) => Interest becomes;
- Possessory
- Indefeasibly vested remainder
- Vested remainder subject to total divestment

3) UNLESS reform statute is applicable to save gift

Question 2

When does the perpetuities period begin to run for wills/trusts/deeds?

Answer 2

Testamentary trusts/Wills
- Once Testator dies

Revocable (inter vivos) trust
- Once trust becomes irrevocable (Settlor dies/amends trust)

Irrevocable (inter vivos) trust
- Once trust is created

Deeds
- Once deed is delivered with intent to pass title

Question 3

What type of interests may be subject to the Rule against Perpetuities?

Answer 3

TPs’ future interests

• Contingent remainders
• Executory interests (so long as => condition stricken => fee simple determinable)
• Executory interests (but if => condition not stricken => Fee simple absolute)
• Vested remainders subject to open

Charity-Private person (vice versa)
- NOT charity-charity (charitable trust presumed to last forever)

Unborn widow

Options

• NOT option to purchase (held by current leaseholder)
• Not right of first refusal (some states)

NOT

• Indefeasibly vested remainder
• Vested remainders subject to total divestment/condition subsequent
• Possibility of reverter
• Right of entry

Question 4

What statutory reforms exist?

Answer 4

‘Wait and see’ approach
- Determine whether interest will ‘actually’ vest/not vest within 21 years

Cy Pres doctrine

• Reform instrument to satisfy perpetuities period
• Charitable trusts/wills (outright bequest to charity)

Uniform Statutory Rule Against Perpetuities (USRAP)
- Perpetuities period is 90 years

Question 5

When may classes close for purposes of RAP?

Answer 5

Ancestor’s death
- Class can no longer take members

Rule of Convenience
- Living member of class survives after termination of preceding estate

Question 6

When may class gift violate RAP?

Answer 6

All or Nothing rule
- If one member violates RAP + others do not violate RAP => Whole class violates RAP