Possessory Interests: Present & Future (Freehold) Estates Flashcards
What is a Fee Simple Absolute?
The Transferor is conveying a non-terminable interest to the Transferee.
EX: A conveys Blackacre to B and her heirs
What is a life estate?
Transferor is conveying a property interest to the Transferee for the rest of the Transferee’s life.
EX 1: A conveys Blackacre to B “for life.”
Transferor’s (A’s) interest — Reversion; if the Transferee (B) dies, the property interest returns to A.
EX 2: A conveys Blackacre to B “for life,” then to C.
C’s interest — REMAINDER (a future interest that IMMEDIATELY follows a life estate, fee tail, or term of years due to a NATURAL termination). Note that if the interest here did not IMMEDIATELY follow, it would be an EXECUTORY INTEREST.
Fee Simple “Absolute” vs. “Defeasible”
“Absolute” means the interest CANNOT be terminated.
“Defeasible” means that the interest can be terminated.
Fee Simple Defeasible “Subject to Condition Subsequent”
A) The transferee’s interest is conditioned upon something happening or not happening.
B) The transferee’s interest is terminated if they don’t fulfill that condition.
EX: A conveys Blackacre to B for life, if B uses the property only for farming purposes.
Transferor’s interest: Right of entry; when that condition fails, the Transferor must re-claim the property. Right of entry does NOT automatically vest.
Fee simple DETERMINABLE
Deals with time periods.
EX: A conveys Blackacre to B “for as long as,” “during,” etc.
Transferor’s interest: Possibility of reverter; if the condition fails, the Transferor’s interest automatically vests/returns back to them (unlike right of entry).
Fee Simple/Life Estate Defeasible “Subject to Executory Limit”
“Subject to executory limit” = a 3rd party is involved
EX: A transfers Blackacre to B for life, then to C for life
What is the general definition of REMAINDER?
(Hint: future possessory interest)
REMAINDER is a future interest that IMMEDIATELY follows the NATURAL TERMINATION of a life estate (end of life), fee tail (end of the blood line), or term of years. Usually it’ll be a life estate.
EX: A conveys Blackacre to B “for life,” then to C “for life.” B has a life estate and C has a remainder.
NOTE 1: if the interest does not IMMEDIATELY follow, it would be an EXECUTORY INTEREST.
EX: A conveys Blackacre to B “for life,” then after 10 minutes, to C. Because of that 10 minute gap where there is a reversion, C has an executory interest, not a remainder.
NOTE 2: This interest does NOT apply to fee simple absolute, since there is no natural termination.
What is a FEE TAIL
The possessory interest continues in the blood line.
What is an executory interest?
(Hint: future interest)
A nonpossessory future interest held by a transferee that follows a FEE SIMPLE.
SHIFTING Executory Interest — Divests Transferee
EX: A conveys Blackacre to B if B uses the land only for farming purposes. If B does not, then to C. C has a shifting executory interest because it divests the Transferee (B) of the property.
SPRINGING Executory Interest — Divests Transferor
EX: A conveys Blackacre to B if B returns from Canada to the United States. A has a fee simple, B has a springing executory interest because it divests the Transferor (A) of the property.
What is VESTED vs. CONTINGENT REMAINDER?
VESTED Remainder = a remainder that is created (1) in a LIVING/ascertainable person and (2) NOT subject to any condition precedent. A condition precedent is an event (other than natural termination of prior estate) that MUST occur BEFORE the remainder can become a possessory estate.
EX 1: M conveys Greenacre to A for the rest of A’s life, then to B. A has a life estate, B has a vested remainder INDEFEASIBLE. B is alive and ascertainable (you can find him and point him out) and the interest is not subject to any condition precedent. B’s vested remainder is indefeasible because it has 100% certainty; no condition subsequent, B’s class will not enlarge.
EX 2: M conveys Greenacre to A for life, then to B on the condition that B uses the land only for farming purposes. B has a vested remainder SUBJECT TO DIVESTMENT because his vested remainder has a condition SUBSEQUENT.
EX 3: M conveys Greenacre to A for life, then to A’s children (B is A’s child). B has a vested remainder SUBJECTED TO OPEN/PARTIAL DIVESTMENT, since A may have more children, B’s “class size” may increase and dilute B’s amount of interest.
CONTINGENT Remainder = If either element of the vested remainder test is NOT satisfied, it is a contingent remainder. Note that you cannot ascertain who a person’s heirs are until that person dies.
EX 1: M conveys Greenacre to A for the rest of A’s life, then to A’s (unborn) children then to B. A’s unborn children have contingent remainder because they are not alive or ascertainable.
EX 2: M conveys Greenacre to A for the rest of A’s life, then to A’s heirs. A’s heirs have a contingent remainder because they are not ascertainable until A dies. Heirs are DIFFERENT from “children.” Children ARE ascertainable if alive.
What is the common law doctrine of destructibility of contingent remainders?
RULE: A contingent remainder is DESTROYED if it fails to vest when the prior estate terminates
EX: Michael conveys Greenacre “To Amy for life, then to Bobby and his heirs if Bobby reaches age 25.” (Bobby is 20 y.o.) Bobby has a contingent remainder because Bobby’s interest is future possessory immediately following a life estate, he is the transferee, and he has a condition precedent (reaching 25 years old). If Amy dies before Bobby reaches 25, Bobby’s interest is destroyed.
MODERN RULE: Here, Bobby’s interest would not be destroyed. Greenacre would revert back to the Transferor until Bobby reaches 25.
What is the common law rule in Shelley’s case?
RULE: If a conveyance creates a life estate or fee tail in a transferee AND also creates a remainder in fee simple in that transferee’s HEIRS, then the future interest belongs to the transferee (NOT the heirs).
EX: Michael conveys Greenacre “to Amy for life, then to Amy’s heirs.”
First, Amy’s heirs have a future possessory interest and they are transferee’s immediately following a life estate—so they would have a CONTINGENT remainder because Amy’s heirs are not ascertainable until Amy dies. Shelley’s case rule applies because the conveyance creates a life estate in Amy AND also creates a remainder in fee simple to Amy’s heirs—so the future interest belongs to Amy, NOT her heirs.
NOTE: Essentially, Michael conveys Greenacre “to Amy for life, then to Amy’s heirs” under the Shelley’s case rule really means that Michael conveys Greenacre “to Amy and her heirs.” The rule merges the life estate with the fee simple absolute.
What is the common law doctrine of WORTHIER TITLE?
RULE: An owner of real property can transfer land to HEIRS ONLY THROUGH the “Worthier” method of descent (intestate succession) — NOT by means of devise (transfer of property via a WILL) or conveyance (transfer of property via a DEED).
EX: Michael conveys Greenacre “to Amy for life, then to Michael’s heirs.” Under this rule, “then to Michael’s heirs” would be eliminated. Michael would have reversion, Amy would have a life estate, Michael’s heirs have nothing.
MODERN RULE: Here, Michael’s heirs would have a contingent remainder since Michael’s heirs are not ascertainable until Michael dies.
What is the rule against perpetuities?
NOTE: The purpose of the rule is make properties with future contingent interests floating (tied up in perpetuity) more marketable/useable. Without it, some land can sit unusable for years. Yet, we want to allow freedom of transfer. So the rule is a compromise.
Issue: At the time the instrument TOOK EFFECT, was the purported future interest created in the transferee valid or invalid?
STEP 1: Determine whether the future interest at issue is subject to the R.A.P.
- Does NOT apply to transferor’s future interest
- Applies to contingent remainder, vested remainder subject to open, and executory interest subject to condition
- Does NOT apply to charity-to-charity transfers and options to purchase by non-freehold tenants leasing the property
STEP 2: Determine when the perpetuity window begins (when did the deed or will or trust legally take effect?)
- “Conveys” means you have a deed; takes effect when deed delivers
- “Devises” means you have a will; takes effect when the testator dies
- For TESTIMENTARY TRUSTS, it takes effect when the settlor dies
- For INTER VIVOS TRUSTS, it takes effect when the trust becomes irrevocable (specified by settlor or when settlor dies)
STEP 3: Determine what must happen for the future interest to vest or forever fail to vest (and for the class to close if app)
- Is the future interest (when the instrument took effect) going to vest within 21 years or no?
- If there’s any chance that it could vest longer than 21 years, the future interest will be invalidated.
- If one member of the class has a future interest that violates the R.A.P. — invalidates the FI for the whole class
- When does the class close:
A) When no new members can be added to the class
B) Rule of convenience — when a prior estate terminates, when any member of the class is entitled to possession of the property.
STEP 4: Identify who the relevant lives in being are that can be used as the initial point in our P.W.
- A relevant life = a life who can effect the vesting
- If Transferor has not specified which relevant life, we can use any relevant life as long as they effect the vesting
STEP 5: Look into the crystal ball and test each relevant life to determine if any one can validate the future interest
- ONE relevant life that can effect the vesting will satisfy the rule
Example 1 of the rule against perpetuities: Michael CONVEYS Greenacre “to Amy and her heirs, but if alcohol is EVER consumed on Greenacre, then to Bobby and his heirs.”
Call of question: What is Bobby’s interest in Greenacre?
Bobby is a transferee who has a present, non-possessory future interest in Greenacre—a SHIFTING EXECUTORY INTEREST since this is a fee simple and Bobby does not get Greenacre unless this condition precedent is satisfied.
STEP 1: Bobby’s shifting executory interest is subject to the R.A.P.
STEP 2: The perpetuity window begins when they deed is delivered (when the word conveys is said in the fact pattern)
STEP 3: Bobby’s interest vests when alcohol is consumed on Greenacre. Even if Bobby dies, his shifting executory interest would pass to his heirs. Thus, there is no way to logically conclude when Bobby’s interest would forever fail to vest.
- This would fail the R.A.P.; Bobby’s interest probably is invalidated at this point
STEP 4: Who is alive at the time of the conveyance that can effect vesting? Amy is the first in mind because she’s the most relevant.
STEP 5: Is there any possibility that 21 years after Amy dies, could Bobby’s interest vest? Yes, so Amy cannot be our validating life. We can try to plug in Bobby or Michael in, but no matter what, more than 21 years later—someone could end up drinking alcohol on Greenacre.
CONCLUSION: Bobby’s future interest VIOLATES the R.A.P. So we treat Bobby’s interest as if it never existed. But the conveyance to Amy and her heirs is still valid, but Bobby and his heirs have nothing. At the moment the conveyance took legal effect, Bobby had no interest in Greenacre. So if alcohol was consumed on Greenacre after Amy took possession of the property, Michael would get the property back.
ALTERNATE HYPO: If it was Michael CONVEYS Greenacre “to Amy and her heirs, but if alcohol is ever consumed BY AMY on Greenacre, then to Bobby and his heirs,” then Bobby would still have a shifting executory interest as this would NOT violate the R.A.P. We can logically conclude that Bobby’s interest would forever fail to vest if Amy died.
