BAR FLASHCARDS - PEFI 3
Future Interests:
If a future interest is held by a transferor….
If a future interest is held by someone other than the transferor, it must be ….
A future interest gives its holder the right or possibility of future possession of an estate.
Despite the fact that possession is in the future, a future interest is a present, legally protected right in property.
There are six categories of future interests, and we classify them based on whether they are retained by the transferor/grantor or instead, by a transferee.
If a future interest is held by a transferor, it must be (1) a possibility of reverter; (2) a right of entry; or (3) a reversion.
If a future interest is held by someone other than the transferor, it must be
(1) a contingent remainder;
(2) a vested remainder (of which there are three types; or
(3) an executory interest (of which there are two types, discussed below).
If a future interest is held by a transferor, it must be (3 types)
If a future interest is held by a transferor, it must be (1) a possibility of reverter; (2) a right of entry; or (3) a reversion.
If a future interest is held by someone other than the transferor, it must be (3 types)
If a future interest is held by someone other than the transferor, it must be (1) a contingent remainder; (2) a vested remainder (of which there are three types, discussed below); or (3) an executory interest (of which there are two types, discussed below).
Future interest in grantor (3 types), what does each accompany?
(1) Possibility of reverter
- Accompanies fee simple determinable
(2) Right of entry/power of termination
- Accompanies fee simple subject to condition subsequent.
(3) Reversion
- Accompanies when grantor conveys estate of lesser duration than what she started with (less than fee simple determinable) (other than above).
- Reversion examples:
– life estate. O has a reversion bc its less than fee simple estate.
– Term of years. “To A for 99 years”.
– Both.
Future Interests In transFerOr—reVersIOnarY Interests. There are only three future interests capable of creation in the grantor:
Future Interests In transFerOr—reVersIOnarY Interests
There are only three future interests capable of creation in the grantor: the possibility of reverter, the right of entry, and the reversion.
Possibilities of reverter
Possibilities of reverter: Accompanies FEE SIMPLE DETERMINABLE.
These interests were discussed in Module 2 in connection with defeasible fees. Remember that the possibility of reverter accompa- nies the fee simple determinable and the right of entry (also known as the power of termination) accompanies the fee simple subject to condition subsequent.
rights of entry
Right of reentry accompanies FEE SIMPLE SUBJECT TO CONDITION SUBSEQUENT
the right of entry (also known as the power of termination) accompanies the fee simple subject to condition subsequent.
Reversions
Reversions
A reversion is the estate left in a grantor who conveys less than they own (for example, O conveys “to A for life”; O has a reversion).
Whenever a grantor transfers an estate of lesser duration than what they started with–other than instances giving rise to a possibility of reverter or a right of entry–the future interest that arises is a reversion.
The reversion arises by operation of law; it does not have to be expressly reserved. A reversion is transferable, devisable by will, and inheritable. Its holder can sue for waste and for tortious damage to the reversionary interest.
RAP: Reversionary interests
All reversionary interests are vested and, thus, not subject to the Rule Against Perpetuities (discussed later).
Future Interests In transFerees OVerVIeW:
3 types…
If a future interest is held by someone other than the grantor, it has to be either:
• A contingent remainder, OR
• A vested remainder (of which there are three types): (1) the in- defeasibly vested remainder, (2) the vested remainder subject to complete defeasance (also known as the vested remainder subject to total divestment), and (3) the vested remainder subject to open, OR
• An executory interest (of which there are two types: (1) the shifting executory interest, and (2) the springing executory interest).
A vested remainder: three types
• A vested remainder (of which there are three types):
(1) the in- defeasibly vested remainder,
(2) the vested remainder subject to complete defeasance (also known as the vested remainder subject to total divestment), and
(3) the vested remainder subject to open.
executory interest: two types
• An executory interest (of which there are two types:
(1) the shifting executory interest, and
(2) the springing executory interest).
Future interests in 3rd parties (transfeers): REMAINDERS
- Possession on natural expiration of preceding estate (life estate or term of years).
A remainder is a future interest in a third person that can become possessory on the natural expiration of the preceding estate.
It cannot divest a prior estate, and it cannot follow a time gap after the preceding estate.
A remainder must be expressly created in the instrument creating the preceding possessory estate.
Remainders are either vested or contingent.
O conveys “to A for life, then to B and his heirs.” B has a remain- der.
Remainders follow…
Possession on natural expiration of preceding estate (life estate or term of years).
Life tenant or term of years.
O conveys “to A for life, then to B and his heirs.”
A=life tenant.
B = remainderman. B has a remainder.
O conveys “to A for life, then to B and his heirs one day after A’s death.”
What does B have?
B does not have a remainder (because there is a gap).
To remember the remainder, think of it as:
To remember the remainder, think of it as:
• Sociable. Remainders never travel alone. In other words, remainders always accompany a preceding estate of known, fixed duration (such as a life estate or term of years).
• Patient and polite. A remainder never cuts short or divests the prior taker. Instead, it patiently waits its turn and won’t take until the present life estate or term of years comes to its conclusion. Because a remainder cannot “cut short” a preceding estate, it can never follow a fee simple estate, which is of potentially infinite duration. (Executory interests are the future interests that cut short preceding estates or follow a gap after them.)
Remainder is EITHER:
CONTINGENT or VESTED
Contingent remainder
Contingent: Taker as yet unascertainable or subject to condition precedent.
Contingent remainder: A remainder is contingent if:
(1) it’s created in unborn or unascertained persons, or
(2) it’s subject to a condition precedent, or both.
In other words, a remainder may be contingent as to person or as to event.
a. unborn or unascertained Persons: A remainder created in unborn or unascertained persons is contin- gent because until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends.
b. subject to Condition Precedent: A condition is precedent if it must be satisfied before the remaind- erman has a right to possession. Look for the condition to appear before the language creating the remainder or for it to be woven into the grant to the remainderman. Think of it as a prerequisite to the remainderman’s admission, that is, it’s something they must do in order to succeed in taking possession.
Contingent remainder: Unborn or unascertained person
a. unborn or unascertained Persons: A remainder created in unborn or unascertained persons is contin- gent because until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends.
O conveys “to A for life, then to B’s first child.” A is alive. B, as yet, has no children.
Contingent remainder - yet unborn first child of B. Contingent on B’s first child being born.
O conveys “to A for life, then to B’s heirs.” A is alive. B is alive.
Because a living person has no heirs, while B is alive, his heirs are unknown. Thus, the remainder is contingent.
O conveys “to A for life, then to those children of B who survive A.” A is alive, as is B.
But we don’t yet know which, if any, of B’s chil- dren will survive A. Thus, the remainder in B’s children is contingent.
Contingent remainder: subject to Condition Precedent
b. subject to Condition Precedent
A condition is precedent if it must be satisfied before the remainderman has a right to possession.
Look for the condition to appear before the language creating the remainder or for it to be woven into the grant to the remainderman.
Think of it as a prerequisite to the remainderman’s admission, that is, it’s something they must do in order to succeed in taking possession.
“To A for life, then, if B graduates from college, to B.” A is alive. B is now in high school.
B graduating from college is the CONDITION PRECEDENT.
Before B can take, he must graduate from college. He has not yet satisfied this condition precedent.
B has a contingent remainder subject to condition precedent.
O has a reversion.
What if B graduates from college during A’s lifetime? Indefeasibly vested remainder.
1) O conveys “to A for life, then to B and his heirs if B marries C.”
B’s remainder is contingent because he must marry C before he can take possession.
2) O conveys “to A for life, then to B and his heirs if B marries C, otherwise to D and his heirs.”
B and D have alternative contingent remainders.
O conveys “to A for life, then to B and his heirs; but if B marries C, then to D and his heirs.”
B has a vested remainder (because there’s no condition precedent) subject to divestment by D’s executory interest.
Common law doctrines on remainders
ABOLISHED (wrong answer choice)
Destructibility of Contingent remainders: At common law, a contingent remainder was destroyed if it failed to vest before or upon the termination of the preceding freehold estate.
Rule in shelley’s Case (rule against remainders in Grantee’s Heirs): At common law, if the same instrument created a life estate in A and gave the remainder only to A’s heirs, the remainder was not recognized, and A took the life estate and the remainder.
Doctrine of Worthier title (rule against remainders in Grantor’s Heirs): Under the Doctrine of Worthier Title (“DOWT”), a remainder in the grantor’s heirs is invalid and becomes a reversion in the grantor.
If your future interest is created in someone other than the grantor, it is EITHER:
A contingent remainder, or a vested reemainder, or an executory interest.
Vested remainders
A vested remainder is one created in an existing and ascertained person, and not subject to a condition precedent.
There are three types of vested remainders:
(1) the indefeasibly vested remainder;
(2) the vested remainder subject to total divestment (also known as the vested remainder subject to complete defeasance); and
(3) the vested remainder subject to open.
Three types of vested remainders:
There are three types of vested remainders:
(1) the indefeasibly vested remainder: Subject to no conditions and no strings attached.
(2) the vested remainder subject to total divestment (also known as the vested remainder subject to complete defeasance); and
(3) the vested remainder subject to open.
