Future Interests

Question 1

Future Interest - Basic Concept

Answer 1

• gives its holder the right or possibility of future possession of an estate
• even though possession is technically in the future, the right itself (i.e. the future interest) is a PRESENT, legally protected right in the property

Question 2

Categories of Future Interests

Answer 2

• six in total, classified based on whether they’re retained by the transferor/grantor or by a transferee

If future interest held by transferor, it must be:
1) possibility of reverter
2) right of entry OR
3) reversion

If future interest held by third-party, must be:
1) contingent remainder
2) vested remainder (of which there are three types) OR
3) executory interest (of which there are two types)

Question 3

Reversion

Answer 3

• left in a grantor who conveys less than they own
  -> ex: O conveys “to A for life” -> O has a reversion
• arises by operation of law, instead of having to be expressly reserved
  -> so, this is the default - if the grantor conveys less than they own but doesn’t expressly specify possibility of reverter or right of entry, the grantor has a reversion

Question 4

Reversion - Characteristics

Answer 4

• transferable
• devisable by will
• inheritable
• holder can sue for waste and for tortious damage to the reversionary interest

Question 5

Reversionary Interests and Rule Against Perpetuities

Answer 5

• ALL reversionary interests (think this covers anything where it goes back to grantor) are NOT subject to Rule Against Perpetuities
  -> b/c these interests have already vested

Question 6

Future Interests in Transferees - Overview

Answer 6

If future interest held by someone other than grantor, it has to be either:

1) contingent remainder OR

2) vested remainder -> three types
-> a) indefeasibly vested remainder
-> b) vested remainder subject to complete defeasance
-> c) vested remainder subject to open

3) executory interest -> two types:
-> shifting executory interest
-> springing executory interest

Question 7

Remainders - General Concept

Answer 7

• remainder = future interest in a third person that can become possessory on the NATURAL expiration of the preceding estate
• cannot divest a prior estate
• cannot follow a time gap after the preceding estate
• must be expressly created in the instrument creating the preceding possessory estate
• either vested or contingent

Question 8

Remainders - Core Features to Focus On

Answer 8

• always accompany a preceding estate of known, fixed duration (“sociable”)
  -> ex: life estate or term of years
• never cuts short or divests the prior taker (“patient + polite”, unlike executory interests -> waits its turn until the first estate comes to its natural conclusion)

Question 9

Contingent Remainder

Answer 9

Remainder is contingent if:
1) created in unborn or unascertained persons OR
2) it’s subject to a condition precedent
or both

• may be contingent as to person or to event

Question 10

Contingent Remainders - Unborn or Unascertained Persons

Answer 10

• contingent b/c until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends
• you know there will be a remainderman, but you don’t know who it is yet

Ex’s:
- “to A for life, then to B’s first child”
- “to A for life, then to B’s heirs”
- “To A for life, then to the children of B who survive A”

Question 11

Contingent Remainder - Subject to Condition Precedent

Answer 11

• condition precedent = something that must be satisfied before the remainderman has a right to possession
• prerequisite to the remainderman’s admission (something remainderman must do in order to succeed in taking possession)
• look for language creating the condition to appear before the language creating the remainder or for it to be woven into the grant to the remainderman

Ex’s:
- “to A for life, then, if B graduates from college, to B”
- “to a for life, then B and B’s heirs if B marries C, otherwise to D and his heirs” (B and D would have alternative contingent remainders here)

Question 12

Contingent Remainders - Technical Rules of the Common Law

Answer 12

ABOLISHED IN MOST JURISDICTIONS - UNLIKELY TO HAVE TO APPLY

• destructibility of contingent remainders - were destroyed at common law if failed to vest before or upon termination of the preceding estate
• rule in shelley’s case (rule against remainders in grantee’s heirs - became remainder to grantee) -> often the WRONG answer on MBE
• doctrine of worthier title (rule against remainders in grantor’s heirs) -> remainder in grantor’s heirs became reversion in grantor

Question 13

Vested Remainders

Answer 13

• created in an existing and ascertained person + not subject to a condition precedent

Three types of vested remainders:
1) indefeasibly vested remainder
2) vested remainder subject to total divestment
3) vested remainder subject to open

Question 14

Indefeasibly Vested Remainder

Answer 14

• a vested remainder that is not subject to divestment or diminution
• holder of this kind of remainder is CERTAIN to acquire the estate in the future, with no strings or conditions attached

Question 15

Vested Remainder Subject to Total Divestment

Answer 15

• vested remainder that is subject to a condition subsequent
• remainderman exists, BUT his right to possession could be cut short because of a condition subsequent
  -> ex: to A for life, then to B and his heirs, but if B dies unmarried, then to C and his heirs”

Question 16

Distinguishing Between Condition Subsequent and Condition Precedent

Answer 16

• condition precedent creates contingent remainder
• condition subsequent creates a vested remainder subject to total divestment
  -when conditional language in a transfer follows language that, taken alone and set off by commas, would create a vested remainder, the condition is a condition subsequent and you have a vested remainder subject to complete defeasance
  -> where language is ambiguous, the general preference is for vested remainders subject to divestment rather than contingent remainders or executory interests

Question 17

Vested Remainder Subject to Open

Answer 17

• vested remainder created in a class of persons that is certain to become possessory, but is subject to diminution
  -> ex: birth of additional persons who will share in the remainder as a class
• there’s a group of persons, at least one of whom is qualified to take possession, but each group member’s share could get smaller because additional takers, not yet ascertained, may still join the class

Question 18

Class Gifts

Answer 18

• “class” = a group of persons having a common characteristic
• share of each member is determined by the number of persons in the class
• class gift of a remainder may be subject to open (at least one group member exists) or contingent (all group members are unascertained)

Question 19

When the Class Closes

Answer 19

• class is open when it’s still possible for others to join
• under the rule of convenience, the class closes when some member of the class can call for distribution of their share of the class gift
  -> i.e. closes when any member can demand possession
• note that book seems to indicate the rule of convenience is the default rule -> applied in absence of express contrary intent

Question 20

Class Gifts and Survival

Answer 20

• survival of a class member to the time of closing is usually unnecessary to share in a future gift
  -> UNLESS survival was made an express condition
• certain terms are construed to create implied survivorship conditions (ex: widow, heirs, next of kin)
• note that under some anti-lapse statutes, a gift will be saved for the party’s descendants even if there’s an express survival contingency

Question 21

Executory Interests

Answer 21

• future interests in third parties that either:
  -> divest a transferee’s preceding freehold estate (“shifting interests”)
  -> OR follow a gap in possession or cut short a grantor’s estate (“springing interests”)
• executory interests must take effect by cutting short some other interest - either an interest in another person (shifting) or an interest in the grantor/the grantor’s heirs (springing)

Question 22

Shifting Executory Interests

Answer 22

• always follow a defeasible fee (as the name suggests, these go with fee simples subject to executory interests)
• cut short someone other than the grantor
• ex: “to A, but if B returns from Canada, to B and his heirs” -> B would have a shifting executory interest (can cut off A’s time by returning from Canada)

Question 23

Springing Executory Interest

Answer 23

• springing executory interest cuts short the interest of O, the grantor
• ex: grant from O “to A and her heirs when A marries B” -> A has springing exec interest b/c will divest grantor O when she marries

Question 24

Transferability of Remainders and Executory Interests

Answer 24

• vested remainders are fully transferable, descendible by intestacy, and devisable by will
• contingent remainders and executory interests were not transferable inter vivos at common law, but most courts today hold that they’re freely transferable
• contingent remainders + executory interests are descendible + devisable, provided survival is not a condition to the interest’s taking
• book noted that any future interest that is transferable is subject to involuntary transfer -> reachable by creditors