Future Interests - Rule Against Perpetuities

Question 1

What is the common law rule against perpetuities (RAP)?

Answer 1

Under the common law, a future interest MUST vest within 21 years of the death of a life in being.

In other words, if there is ANY possibility that the future interest will not vest within the lifetime of someone alive at the time the instrument takes effect PLUS 21 years following their death, the interest will be invalidated.

Question 2

What is the “wait and see” approach that many jurisdictions take to RAP?

Answer 2

In many jurisdictions, courts will “wait and see” if the future interest actually does fail to vest within 21 years after the death of a life in being, rather than invalidating the interest for any possibility that it will fail to vest within the time period.

Question 3

What is the modern approach to RAP?

Answer 3

Under a modern trend, some courts will reduce age contingencies exceeding 21 years to validate a conveyance that otherwise violates the common law rule against perpetuities.

Question 4

Under modern trend application of RAP, does this violate RAP:

O conveys Greenacre to A for life, then to A’s children who reach the age of 30.

Answer 4

On its face, it violates RAP, so modern trend is to reduce the age to 21 as to not violate RAP, so the conveyance would be modified to:

“O conveys Greenacre to A for life, then to A’s children who reach the age of 21.”

Question 5

Under common law application of RAP, does this violate RAP:

O conveys Greenacre to A for life, then to A’s children who reach the age of 30.

Answer 5

Yes. This conveyance would be invalidated under the common law, because there is a possibility that the interest would not vest within 21 years after A’s death. However, the modern trend allows courts to rewrite the conveyance to: O conveys Greenacre “to A for life, then to A’s children who reach the age of 21.”

Question 6

For the purposes of “life in being” for RAP, what lives are considered?

Answer 6

ANY RELEVANT LIFE alive when instrument takes effect.

Transferor can specify the measuring life, but absent that, can use ANYBODY WHO EFFECTS THE VESTING OF THE INTEREST, AND ALL WE NEED IS ONE OF LIFE TO VALIDATE THE INSTRUMENT. ****

so if will devises “to all my grandchildren who shall reach the age of 21” then all of the grantor’s children can be measuring lives, as they are relevant to whether or not conveyance will violate RAP, even though they themselves do not have an interest in the conveyance.

“lives in being”are the relevant parties alive when person dies for testamentary trust
“lives in being” are relevant parties alive when person executes trust for inter vivos trust

Question 7

What is the charity-charity exception to RAP?

Answer 7

If being conveyed from one charity to another, then NOT subject to RAP

Question 8

What is the exception for options to purchase held by non-freehold tenants who are leasing the property?

Answer 8

Non-freehold tenants who are leasing the property and hold options to purchase land are not subject to RAP.

Question 9

When does the 21 years start (will v trust v deed)?

Answer 9

Depends on language being used.

If “conveys”, usually means “deed”
and in this case, it’s when conveyed or when delivered.

If “devises”, usually means “will”
and in this case, will takes legal effect when the person who makes the will DIES.

if trust, then if inter vivos, takes effect when executed
if testamentary trust, takes effect when person dies
“lives in being”are the relevant parties alive when person dies for testamentary trust
“lives in being” are relevant parties alive when person executes trust for inter vivos trust

Question 10

So for testator who is 20 years old, when does RAP start?

Answer 10

When testator DIES. So can live to 100, and the future interest still does not violate RAP.

Question 11

What is a trust?

Answer 11

Depends on if testamentary or inter vivos.

If testamentary, time starts when settlor dies.

If inter vivos, time starts when trust becomes irrevocable (if not specified when becomes revocable, it’s when settlor dies)

Question 12

Test tip: What is the approach to assessing a RAP question?

Answer 12

In determining whether the future interest created in the transferee is valid or invalid, must assess at the time the instrument took effect and ask:

1. Is the FI subject to RAP?
2. When did the perpetuity window begin?
3. What must happen for the FI to vest or forever fail to vest (and if applicable, for the class to close)?
4. Who are the relevant lives in being who can be used as the initial point in our perpetuity window?
5. Can any of the relevant lives validate the FI?

Question 13

What is the rationale behind a RAP?

Answer 13

Do not want land ownership to be so up in the air and tied up with contingencies that cannot figure out who owns and when/how can be conveyed.

Question 14

What are synonyms for measuring life?

Answer 14

MEASURING LIFE = “VALIDATING LIFE”

Note: a relevant life is anybody who affects vesting in the fact pattern, and they are potentially a validating life, and we just need one.

So note, in every fact pattern, there is always a relevant life, but not always a validating life.

“lives in being”are the relevant parties alive when person dies for testamentary trust
“lives in being” are relevant parties alive when person executes trust for inter vivos trust

Question 15

What if convey “to Amy and her heirs, but then if alcohol is ever used on premises, then to Bobby and their heirs.”

1. What is Bobby’s interest? Subject to RAP?
2. When does perpetuity window begin?
3. What must happen for the FI to vest or forever fail to vest (and if applicable, for the class to close)?
4. Who are the relevant lives in being who can be used as the initial point in our perpetuity window?
5. Can any of the relevant lives validate the FI?

Answer 15

1. Bobby has a future interest (he is a transferee of a shifting executory interest) with a contingent executory interest.

Yes, subject to RAP, as a contingent executory interest.

2. Perpetuity window begins at moment deed delivered, or if silent on this, then when conveyed is said in fact pattern.
3. Vests when alcohol consumed on the premises.

Forever fails to vest when…no logical way for the interest to forever fail to vest. Even if Bobby dies, his heirs would inherit his shifting executory interest.

*Note: when you see a question and no logical way for the interest to forever fail to vest, then good indication will fail RAP and be invalid.

4. Relevant lives = Amy, Bobby, transferor.
5. Looking at Amy, if Amy dies, could still be 21+ years before someone drinks alcohol on interest, so does not work for her.

If Bobby dies, same thing.

If transferor dies, same thing.

NO RELEVANT LIFE DURING PERPETUITY WINDOW TO VALIDATE FUTURE INTEREST OF BOBBY, THEREFORE INVALID BECAUSE INSTRUMENT VIOLATES RAP.

Note: failing RAP does not invalidate the entire deed, it just invalidates the interest that invalidates RAP (ie, Boby’s interest). So Amy would still get the deed, and would treat as if struck Bobby’s interest from deed at time conveyed.

So what if a year after deed conveyed, Amy drinks alcohol on premises, does Bobby get the property?

At common law, NOPE. RAP is proactive and happens at time perpetuity.

At modern trend, YES. Courts would wait and see, and if happened in one year, Bobby’s interest would be valid.

Question 16

What FI’s are subject to RAP?

Answer 16

1. Contingent executory interest
2. Contingent remainder;
   AND
3. The vested remainder subject to open

Question 17

What if convey “to Amy and her heirs, but then if AMY EVER USES ALCOHOL on premises, then to Bobby and their heirs.”

1. What is Bobby’s interest? Subject to RAP?
2. When does perpetuity window begin?
3. What must happen for the FI to vest or forever fail to vest (and if applicable, for the class to close)?
4. Who are the relevant lives in being who can be used as the initial point in our perpetuity window?
5. Can any of the relevant lives validate the FI?

Answer 17

1. Bobby has a future interest (he is a transferee of a shifting executory interest) with a contingent executory interest.

Yes, subject to RAP, as a contingent executory interest.

2. Perpetuity window begins at moment deed delivered, or if silent on this, then when conveyed is said in fact pattern.
3. Vests when alcohol consumed by Amy on the premises.

Forever fails to vest when Amy dies if Amy never drank alcohol during her life.

4. Amy, Bobby, conveyor
5. Amy’s life can validate the FI, because if she dies, then no way that 21 years from her death that interest could fail to vest. So Bobby’s interest is VALID.

Question 18

“To Amy for life, then to Amy’s first child to reach age 30.”

1. What is Amy’s unborn child’s interest? Subject to RAP?
2. When does perpetuity window begin?
3. What must happen for the FI to vest or forever fail to vest (and if applicable, for the class to close)?
4. Who are the relevant lives in being who can be used as the initial point in our perpetuity window?
5. Can any of the relevant lives validate the FI? (ie, is there any way that the interest would not vest within 21 years of a life in being?)

Answer 18

1. Future interest (ie, present nonpossessory interest); it’s a remainder because it immediately follows a life estate. Contingent on child not being born and reaching age 30, so subject to condition remainder.
   Yes, conditional remainder’s subject to RAP.
2. PW begins when conveyed.
3. Must be born and reach 30 for it to vest.

Forever fails to vest if child not born; or if child born but does not reach 30.

4. Conveyor and Amy
5. Amy could take property, have a child a year later, then die a year after that, and child’s interest would not vest within 21 years (because would still have to wait 8 years to be 30 under terms of instrument). Therefore, does not validate the instrument and the unborn child’s interest is INVALID.
   Amy has life interest, conveyor has a reversion.

Note: Yes, Amy could take property, have a child, live for 50 years, at which point the child is well over 30, and it would vest, but we are looking for certain vestment.
We are asking, is there any way that the interest would not vest within 21 years of a life in being?

Remember the rationale, common rule public policy does not want the land to be subject to all these conditions, not sure if transferable, etc.

Under modern rule, wait and see, in first instance (has child a year later, then dies a year after that, RAP would be violated, so they would supplant “30 years of age” with “22 years of age” to ensure it vests. They would cure the RAP violation by modifying the instrument.

PRO TIP: if life estate and then to children to reach any age over 21, then violates RAP.
if life estate to Amy, then to children to reach [any age under 21], then does not violate RAP.

Question 19

“To Amy for life, then to Bobby’s children.”

What are Bobby’s children considered to be if Bobby is alive?

Answer 19

Open class.

bobby’s chlidren have a class gift.

Question 20

“To Amy for life, then to Bobby’s children.”

What are Bobby’s children considered to be if Bobby is dead?

Answer 20

Closed class.

bobby’s chlidren have a class gift.

Question 21

What is the all or none rule?

Answer 21

“If bad for one in the class, then bad for all.”

If one person fails the RAP, then they all fail.

eg, if 99 pass RAP, but 1 fails, then by all or none rule/bad for one, bad for all rule dictates that none of their interests is valid.

Question 22

“To Amy for life, then to Bobby’s children.”
Bobby has one child: Chris.

How to analyze?

Answer 22

1. What is bobby’s children’s interest? Subject to RAP?
2. When does perpetuity window begin?
3. What must happen for the FI to vest or forever fail to vest (and if applicable, for the class to close)?
4. Who are the relevant lives in being who can be used as the initial point in our perpetuity window?
5. Can any of the relevant lives validate the FI?

Question 23

“To Amy for life, then to Bobby’s children.”
Bobby has one child: Chris.

1. What is bobby’s children’s interest? Subject to RAP?
2. When does perpetuity window begin?
3. What must happen for the FI to vest or forever fail to vest (and if applicable, for the class to close)?
4. Who are the relevant lives in being who can be used as the initial point in our perpetuity window?
5. Can any of the relevant lives validate the FI? (ie, is there any way that the interest would not vest within 21 years of a life in being?)

Answer 23

1. future interest: vested remainder subject to open.
2. When conveyed to Amy.
3. What must happen for class to close for Chris? Either Bobby dies; or when Amy dies.
4. Amy, Bobby, Chris, Conveyor
5. Tip: when doing this, look first at the people who have more impact, as they are likely to be the key figures. Here, Amy and Bobby are first to look at, then Chris if still can’t find a validating life.
   Amy: When AMy dies, goes right to Chris. So no possible way (due to rule of convenience) that the class would remain open for more than 21 years. SO WE HAVE A VALIDATING LIFE, and CONVEYANCE IS VALID.

Chris’s subject remainder subject to open is alllllll gravy (valid).

Without the rule of convenience, class would not close at Amy’s death, Bobby could still have children 21 years down the line, so the rule of convenience is a savior for Chris’ future interest.

Note, however, that Bobby is a validating life also, and would save CHris’ future interest even without rule of convenience, because once he dies, class closes, so no way it could remain open for 21 years. BOOM. they are both validating lives.

Question 24

What is the rule of convenience?

Answer 24

he Rule of Convenience is a rule of construction that applies to class gifts. Where there is no expression of intent that all members of a class should take, the class closes when a member of the class can call for distribution of a share of the class gift. The rule is designed to avoid delaying distribution beyond that period necessary and, at the same time, avoiding rebates in the future. Its primary significance is that, under it, no after-born members can take.

Thus, if verbiage is “to all grandchildren whenever born,” then the rule of convenience would not apply, because grantor expressly intended that all members of the class should take.

Applies to future interests where there’s a vested remainder subject to open. (ie, class gift subject to open)

In this example (“To Amy for life, then to Bobby’s children.”
Bobby has one child: Chris.), rule of convenience dictates that the CLASS CLOSES WHEN AMY DIES AND BOBBY IS ENTITLED TO POSSESSION.

Question 25

For future interest: vested remainder subject to open, what are the two ways the class can close?

Answer 25

When it’s no longer possible to add new members, or under the rule of convenience.

Question 26

“To Amy for life, then to Amy’s children who graduate from law school.”
Amy has two children: Bobby and Chris. Bobby has graduated from law school; Chris has not.

1. What is the interest of Chris? Subject to RAP?
2. When does perpetuity window begin?
3. What must happen for the FI to vest or forever fail to vest (and if applicable, for the class to close)?
4. Who are the relevant lives in being who can be used as the initial point in our perpetuity window?
5. Can any of the relevant lives validate the FI? (ie, is there any way that the interest would not vest within 21 years of a life in being?)

Answer 26

1. Bobby has a future interest with a contingent remainder subject to open (if Amy has more children and they graduate from law school).
   Yes, subject to RAP
2. upon conveyance
3. Closes when Amy dies.

For Chris, has to graduate for law school to vest.

Will forever fail to vest if Chris does not graduate law school.

Class will close when AMY DIES, because Bobby is entitled to possession then under rule of convenience bc he’s already graduated from law school, so one class member entitled to possession, rule of convenience says class closes.

4. Relevant lives in being are Chris, Bobby, Amy, grantor. (anyone mentioned in instrument that’s living at time of conveyance.)
5. Amy: is there any way class could remain open 21 years after Amy does?
   No, because vests upon her death to Bobby.
   Could class be added to after death?
   Yes, Amy could die, then 25 years later, Chris attends law school.
   Therefore, Amy is not a validating life.

Bobby: Same. Amy could die, then 25 years later, Chris could attend law school, so would not vest within 21 years.

Chris: Class could remain open and property would not fully vest 21 years after Chris’ life, because Chris could indeed go to law school and fulfill his contingency, but then Amy could be alive still and live another 25 years, meaning the class would remain open beyond 21 years.

WE ARE DEEP IN THE WEEDS AT THIS POINT BUT YOU GOTTTTT THIS. YO GOTTI THIS.

Just gotta look for any way the life in being you’re assessing if any way would not vest within 21 years after their death.

Note: because Chris’ interest is invalid due to RAP, so is Bobby’s, due to the ALL OR NOTHING rule.
This is one of the biggest criticisms against RAP because seems to counter the intent of the conveyor.
In wait and see rule application of RAP (modern trend), wait and not worry about it until time period has passed, and Bobby’s interest would be alive.
Also, court may modify it to reflect inferred intent to enter a saving clause (Cy pres doctrine).

Question 27

TEST TIP: Any time you see class gift, if you have some members that have vested remainder, and others with contingent remainder…

Answer 27

… START WITH CONTINGENT REMAINDER BC MORE LIKELY TO VIOLATE RAP AND IF BAD FOR ONE, THEN BAD FOR ALL, AND YOU’LL KNOW QUICKER WHETHER OR NOT INTEREST INVALIDATED BY RAP.

Question 28

“To Amy for life, then to Amy’s children who graduate from law school.”
Amy has two children: Bobby and Chris. Bobby has graduated from law school; Chris has not.

What is result under modern approach

Answer 28

Wait and see.

A lot of jurisdictions even say instead of life period +21 years, they just say 90 years after instrument conveyed.

Court may also apply Cy Pres doctrine and change instrument to allow Bobby to get the interest (as intent seems to want to reward him for graduating law school) and incentive Chris to go ahead and graduate.

Question 29

MBE tip concerning class gifts:

Answer 29

Class gifts that take effect when grandchildren turn 21 are valid if the gift is created in a WILL, but not if the gift is created in an inter vivos conveyance.