Future interests: rule against perpetuities

Question 1

Scope of application

Answer 1

The rule applies to:

(1) contingent remainders;
(2) executory interests; and
(3) class gifts subject to open, if not closed by the rule of convenience.

If the interest does not vest within 21 years of the end of the validating life or lives—those in being at the creation of the interest—the interest is void.

The rule does not focus on when that interest becomes possessory.

Question 2

Excluded interests

Answer 2

The rule against perpetuities does not apply to:

(1) Charity-to-charity gifts;
(2) Options or rights of first refusal (“ROFR”) held by current tenants to purchase a fee interest in the leasehold property; or
(3) Under the Uniform Statutory RAP only, options or ROFR in commercial transactions.

Question 3

Bad to one, bad to all: exceptions

Answer 3

The bad to one, bad to all rule does not apply to:

(1) Transfers of specific dollar amounts to each class member, which are each separately tested under the rule against perpetuities; and
(2) Transfers to a subclass that vests at a specific time—e.g., “to the children of B, and upon the death of each, to that child’s issue.”

Question 4

Rule of convenience

Answer 4

The rule of convenience is a class-closing mechanism that prevents application of the rule against perpetuities.

The rule closes the class when any member of the class becomes entitled to immediate possession.

For example, in the interest created by “To A for life, and then to B’s children,” the class would close at B’s death.

Question 5

Cy pres doctrine

Answer 5

Under the doctrine of cy pres, a court may make changes to a conveyance in order to come “as near as possible” to the intent of the transferor.

Although the doctrine of cy pres is most often applied by a court in the context of a charitable gift, it may also be applied to achieve the intent of a grantor or testator by avoiding the effect of the Rule Against Perpetuities.