Future Interests

Question 1

What are the three types of future interests capable of creation in the grantor?

Answer 1

1. Possibility of reverter (only FS)
2. Right of Entry aka Power of termination (only FS subject to a condition subsequent)
3. The reversion (everything else)

Question 2

What are the three types of future interests in transferees?

Answer 2

1. A vested remainder OR 2. A contingent remainder OR 3. An executory interest

Question 3

What are the three things you need to distinguish when assessing future interests in transferees?

Answer 3

You must distinguish:

1. Vested remainders (three types) from Contingent remainders;
2. The three types of vested remainders from each other; AND
3. All remainders from Executory interests

Question 4

What is a remainder?

Answer 4

A remainder is a future interest created in a grantee that is capable of becoming possessory

(upon the expiration of a prior possessory estate created in the same conveyance)

Question 5

What is a VESTED remainder?

Answer 5

A remainder is vested IF:

1. It is created in an ASCERTAINED person, AND
2. It is NOT subject to any condition precedent

Question 6

What is a CONTINGENT remainder?

Answer 6

A remainder is contingent IF:

1. It is created in an UNascertained person, OR
2. It IS subject to a condition precedent

(or both)

(i.e., If it’s not a vested remained, it MUST be contingent!)

Question 7

What does it mean to be an ascertained vs. an unascertained person?

(Examples)

Answer 7

Ascertained: the remainder exists in a specific, living person

e.g., “To A for life, then to B’s son,” where A and B’s son are both alive.

Unascertained: the remainder exists in an uncertain or yet unborn person

e. g., “To A for life, then to B’s first child,” where A is alive but B has no kids yet
e. g., “To A for life, then to B’s heirs,” where A is alive and B is alive, so unascertained because a living person can have no heirs

Question 8

What is a condition precedent?

Answer 8

A condition precendent is a condition that appears BEFORE the language creating the remainder, or is woven into the grant to the remainderman

e.g., “To A for life, then, IF B GRADUATES COLLEGE, to B”

Question 9

What are the types of vested remainders?

Answer 9

1. indefeasibly vested
2. vested remainder subject to complete defeasance (total divestment)
3. vested remainder subject to open (only remainders can be vested)

Question 10

What are the two types of executory interests?

Answer 10

1. shifting
2. springing

Question 11

What is an executory interest?

Answer 11

A future interest created in a 3d party, which is not a remainder and which takes effect either by:

1. cutting short some interest of another OR
2. cutting short some interest in the grantor or his heirs

Question 12

What is a shifting executory interest?

Answer 12

(“Fee simple with a catch”)

1. Follows defeasible fee AND
2. Cuts short someone other than O, the grantor
   e. g., “O to A and his heirs, but if B returns from Canada, to B and her heirs.”

B has a shifting executory interest; A has fee simple subject to B’s shifting executory interest

(B’s interest is not a remainder because remainders NEVER follow defeasible fees!)

Question 13

What is a springing executory interest?

Answer 13

Cuts short O, the grantor

e.g., “O to A, if and when A marries.” A is unmarried.

A has a springing executory interest

O has fee simple subject to A’s springing executory interest

Question 14

NY QUESTION

What are executory interests and contingent remainders called in NY?

(Distinction abolished)

Answer 14

Remainders subject to a condition precedent

Question 15

What is a remainder (of any type, vested or contingent) (4 elements)

Answer 15

A remainder is (1) a future interest created in a grantee [that is] (2) capable of becoming possessory (3) upon the expiration of a prior estate [that is] (4) created in the same conveyance as the remainder

Question 16

What are the characteristics of remainders? (2)

Answer 16

1. Always accompany a preceding estate of known, fixed duration (LE or Term of Years)
2. Cannot cut short or divest a prior transferee (never follows a defeasible fee—that would be an executory interest)

Question 17

What makes a remainder vested?

Answer 17

Created in a known, ascertained person AND

Not subject to any condition precedent

Question 18

What makes a remainder contingent?

Answer 18

Created in an unborn or unascertained person AND/OR

Is subject to a condition precedent

Question 19

NY QUESTION

What are future interests subject to a condition precedent called in NY?

Answer 19

Remainder subject to a condition precedent (usually a contingent remainder)

Question 20

What constitutes a condition precedent?

Answer 20

1. It appears before the language creating the remainder OR
2. Is woven into the grant to the remainderman (a prerequisite)

Question 21

What are the limiting doctrines to contingent remainders? (3)

Answer 21

1. Destructibility of contingent remainder
2. Rule in Shelley’s Case
3. Doctrine of worthier title

Question 22

What is the rule of destructibility of contingent remainders?

(Historical common law rule)

(Present MBE)

(NY law)

Answer 22

Historically: IF contingent remainder still contingent when preceding estate destroyed, contingent remainder destroyed

Today (MBE and NY): Rule abolished

Question 23

What is the rule in Shelley’s Case?

i.e., “To A for life, then, on A’s death, to A’s heirs,” where A is alive

(Historical)

(Present MBE)

(NY)

Answer 23

Historically: RISC present and future interests merge, giving A a FSA

Today: (virtually abolished) RISC creates Life Estate in A, contingent remainder in heirs; O has reversion

NY: RISC abolished

Question 24

What is the rule w/r/t the doctrine of worthier title?

i.e., O (who is alive) to A for life, then to O’s heirs. What are the future interests of O, A, and O’s heirs?

(MBE)

(NY)

Answer 24

MBE: A contingent remainder created in living O’s heirs is void. So A has a life estate and O has reversion.

((NOTE: Rule of construction, not law! Grantor intent can overcome if he clearly intends to create the contingent interest in his heirs))

NY: Abolished as to transfers taking effect after September 1967. So A has a life estate and O’s heirs have a contingent remainder.

Question 25

What is an indefeasibly vested remainder?

Answer 25

A holder that is certain to acquire the estate in the future with no strings attached

Question 26

What happens to indefeasibly vested remainders upon the holder’s death?

Answer 26

Passes per will or intestacy

Question 27

What is a remainder vested subject to complete defeasance?

Answer 27

(Defeasance = forfeiture)

A known holder with no condition precedent

Estate has a condition subsequent

Question 28

NY QUESTION

In NY, what is a vested remainder subject to complete defeasance called?

Answer 28

Remainder vested subject to complete defeasance

Question 29

What is the doctrine of worthier title?

Answer 29

Doctrine of worthier title happens when living grantor tries to create a future interest in his own heirs.

Question 30

What is the rule for distinguishing between a condition subsequent and a condition precedent?

Answer 30

The comma rule: 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.

e.g., “To A for life, remainder to B, PROVIDED, HOWEVER, THAT IF B DIES UNDER AGE-25, to C.”

A has a life estate; B has a VESTED remainder subject to complete defeasance.

BUT IF conditional language appears BEFORE commas, condition precedent.

e.g., “To A for life, AND IF B HAS REACHED AGE-25, to B.”

A has a life estate; B has a CONTINGENT remainder.

Question 31

What is a vested remainder subject to open?

Answer 31

A remainder vested in a group of takers, at least one of whom is qualified to take. Each class member’s share is subject to partial diminution because additional takers can still join.

Question 32

When is a remainder class open?

Answer 32

Others can still join the class

Question 33

When is a remainder class closed?

Answer 33

No others can join the class

Question 34

What is the common law rule of convenience for determining when a remainder class closes?

Answer 34

The class closes whenever any member can demand possession.

(BUT see “womb rule” exception)

Question 35

What is the “womb rule exception” to the common law rule of convenience?

Answer 35

A child in the womb will share with the already-born remaindermen when a class closes

Question 36

What happens when the holder of a vested remainder subject to open dies?

(Common law rule)

(NY rule)

Answer 36

Common law: The remainderman’s share goes to heirs or devisees

NY: see wills