Present Estates and Future Interest (MBE) Flashcards
Present Possessory Estates
1) Fee Simple Absolute
2) Defeasible Fee
3) Life Estate
Present Possessory Estates: Fee Simple Absolute - Language to Create
“To A” or “To A and his heirs”
Present Possessory Estates: Fee Simple Absolute - Characteristics
A fee simple absolute is ABSOLUTE OWNERSHIP with INFINITE DURATION. It is freely transferable, devisable, and descendible.
Present Possessory Estates: Defeasible Fees
Defeasible fees are fee simple estates (meaning, uncertain in duration) that can be TERMINATED upon the happening of a stated event.
Present Possessory Estates: Defeasible Fees - Fee Simple Determinable
A fee simple determinable terminates upon the happening of a stated event that AUTOMATICALLY REVERTS to the grantor.
Present Possessory Estates: Defeasible Fees - Fee Simple Determinable - Language
Uses DURATIONAL LANGUAGE, such as: “to A for so long as” or “to A until”
Present Possessory Estates: Defeasible Fees - Fee Simple Determinable - Characteristics
A fee simple determinable is transferable, devisable, and descendible. If the stated condition is violated, the forfeiture is AUTOMATIC. Grantors retain POSSIBILITY OF REVERTER
Present Possessory Estates: Defeasible Fees - Fee Simple Determinable - Possibility of Reverter
When a grantor conveys a fee simple determinable, they retain an AUTOMATIC possibility of reverter, which is TRANSFERABLE, DEVISABLE, AND DESCENDIBLE.
Present Possessory Estates: Defeasible Fees - Fee Simple Subject to Condition Subsequent
A fee simple subject to condition subsequent is an estate in which the grantor RESERVES THE RIGHT to terminate upon the happening of a stated event, it IS NOT AUTOMATIC, grantor MUST TAKE ACTION.
Present Possessory Estates: Defeasible Fees - Fee Simple Subject to Condition Subsequent - Language
Two main elements: (i) use of conditional words, such as “upon condition that,” “provided that, “but if,” and (ii) an explicit statement of the grantor’s right to reentry.
Present Possessory Estates: Defeasible Fees - Fee Simple Subject to Condition Subsequent - Characteristics
Unlike fee simple determinable, the FS SCS is NOT automatically terminated if the stated condition occurs. The condition gives the grantor the right to cut the estate short. This is known as RIGHT OF REENTRY.
Present Possessory Estates: Defeasible Fees - Fee Simple Subject to an Executory Interest
If a fee simple terminates upon the happening of a stated event, but PASSES TO A THIRD PARTY rather than reverting to grantor or giving the grantor a right to terminate.
Present Possessory Estates: Defeasible Fees - Fee Simple Subject to an Executory Interest - Language
Look for a third party who will take upon forfeiture of a fee simple estate: “To A, but if X event occurs, then to B”
Present Possessory Estates: Defeasible Fees - Fee Simple Subject to an Executory Interest - Characteristics
If the condition occurs, the estate AUTOMATICALLY forfeits in favor of someone other than the grantor.
Present Possessory Estates: Defeasible Fees - Words of Desire, Hope, or Intention
Words of mere desire, hope, aspiration, or intent are INSUFFICIENT to render an estate a defeasible fee.
Ex: “To A with the hope he becomes a lawyer”
Present Possessory Estates: Defeasible Fees - Restraints on Alienation
An absolute restraint on alienation of a fee simple is VOID.
Present Possessory Estates: Defeasible Fees - Conditions Violating Public Policy
Conditions or limitations that violate public policy are generally VOID, and the grantee TAKES FREE OF THE RESTRAINT.
Ex: Condition to penalize marriage.
Present Possessory Estates: Fee Tail
The fee tail is an estate where INHERITABILITY IS LIMITED TO LINEAL HEIRS.
Present Possessory Estates: Life Estate
A life estate is measured by the life or lives of one or more persons.
Present Possessory Estates: Life Estate - Language
Life estates must be EXPLICIT LIFE TERMS, and never in term of years.
Present Possessory Estates: Life Estate - Pur Autre Vie (Life of Another)
A life estate pur autre vie is measured by a life OTHER THAN THE GRANTEE’S
Present Possessory Estates: Life Estate - Future Interest (Reversion v. Remainder)
If the future interest is held by the grantor, it is called a REVERSION, if held by a third party, it is called a REMAINEDER.
Present Possessory Estates: Life Estate - Doctrine of Waste
A life tenant MUST NOT commit waste (voluntary, permissive, or ameliorative).
Present Possessory Estates: Life Estate - Doctrine of Waste - Affirmative Waste (Natural Resources)
Affirmative waste is ACTUAL, OVERT CONDUCT that causes a decrease in property value.
A life tenant depleting a property’s natural resources could constitute voluntary waste, unless expressly permitted by the grantor.
Present Possessory Estates: Life Estate - Doctrine of Waste - Open Mines Doctrine
If mining was done on the land prior to the life estate, the life tenant can CONTINUE mining, but they’re limited to mines ALREADY OPEN.
Present Possessory Estates: Life Estate - Doctrine of Waste - Permissive Waste (Obligations)
Permissive waste is allowing land to fall into disrepair by failing to take care of it (i.e., neglect)
A life tenant is obligated to: (i) preserve the land and structures in a REASONABLE STATE OF REPAIR, (ii) PAY ORDINARY TAXES of income generated from the land or if no income then FAIR RENTAL VALUE, (iii) pay INTEREST on mortgages, NOT PRINCIPAL, and (iv) pay SPECIAL ASSESSMENTS for public improvements of short duration.
Present Possessory Estates: Life Estate - Doctrine of Waste - Ameliorative Waste (Exceptions)
Ameliorative waste is a change that BENEFITS the property economically. These are not allowed UNLESS: (i) the remainderman does not object, or (ii) a substantial and permanent change in the neighborhood conditions has deprived the property in its current form of reasonable productivity.
Present Possessory Estates: Life Estate - Renunciation of Life Estate
If a life tenant renounces their interest, the future interest following the life estate is generally accelerated so it becomes immediately possessory.
Present Possessory Estates: Life Estate - Insurance and Third Party Tortfeasors
A life tenant IS NOT obligated to insure the premises for the benefit of the remaindermen NOR is he responsible for damages caused by third-party tortfeasors.
Future Interests: Types Held By Transferor
1) Possibility of Reverter
2) Right of Entry
3) Remainder
Future Interests: Types Held By Someone Other Than Transferor
1) Contingent Remainder
2) Vested Remainder
3) An Executory Interest
Future Interests in Transferor: Reversionary Interests
When a grantor transfers an estate of LESSER DURATION than what they started with, the future interest that arises is a REVERSION. It is transferable, devisable, and descendible.
Future Interest in Transferee: Remainder + Types
A remainder is a future interest in a THIRD PERSON that can become possessory upon the NATURAL EXPIRATION of the preceding estate.
Remainders are either VESTED or CONTINGENT
Future Interests in Transferee: Contingent Remainder
A remainder is contingent if: (i) it’s created in UNBORN or UNASCERTAINED persons, or (ii) its SUBJECT TO A CONDITION PRECEDENT, or both.
Future Interests in Transferee: Contingent Remainder - Unborn Persons
A remainder created in unborn persons is contingent because until the remainderman is ascertained, no one is ready to take possession.
Future Interests in Transferee: Contingent Remainder - Subject to Condition Precedent
A condition is precedent if it must be satisfied BEFORE the remainderman has a right to possession.
Future Interests in Transferee: Vested Remainder + Types
A vested remainder is one created in an EXISTING and ASCERTAINED person, and NOT SUBJECT to a condition precedent.
Types of vested remainders: 1) indefeasibly vested remainder, 2) vested remainder subject to total divestment, and 3) vested remainder subject to open
Future Interests in Transferee: Vested Remainder - Indefeasibly Vested Remainder
An indefeasibly vested remainder is NOT SUBJECT to divestment or diminution, the holder of this interest is CERTAIN TO ACQUIRE AN ESTATE in the future.
Future Interests in Transferee: Vested Remainder Subject to Total Divestment
This is subject to a CONDITION SUBSEQUENT, where the remaindermen exists, NOT subject to a condition PRECEDENT, rather his possession could be cut short because of a CONDITION SUBSEQUENT.
Future Interests in Transferee: Vested Remainder Subject to Open
This is a vested remainder created in a class of persons that is certain to become possessory but is SUBJECT TO DIMINUTION (i.e., the birth of additional persons may dilute the interest).
Future Interests in Transferee: Class Gifts
A class is a group of persons having common characteristics (e.g., children, cousins). A class gift of a remainder may be vested subject to open (where AT LEAST ONE member of the group exists) or contingent (where ALL group members are unascertained)
Future Interests in Transferee: Class Gifts - Survival
Survival of a class member to the time of closing is usually unnecessary to share in a future gift, UNLESS survival was an express condition.
Future Interests in Transferee: Executory Interests
Executory interests are future interests in THIRD PARTIES that either DIVEST a transferee’s preceding freehold estate (i.e., shifting) or FOLLOW A GAP in possession or CUT SHORT a grantor’s estate (i.e., springing).
These CUT SHORT some interest, either in another person (shifting) or in the grantor (springing).
Future Interests in Transferee: Executory Interests - Shifting Executory Interest
A shifting executory interest ALWAYS FOLLOWS A DEFEASIBLE FEE and cuts short someone OTHER THAN THE GRANTOR.
Future Interests in Transferee: Executory Interests - Springing Executory Interest
A springing executory interest cuts short the interest of O, the grantor.
Future Interests in Transferee: Transferability of Remainders and Executory Interests
Vested remainders are FULLY TRANSFERABLE, DESCENDIBLE, AND DEVISABLE.
Contingent remainders and executory interests are DESCENDIBLE and DEVISABLE, provided survival is not a condition to the interest’s taking.
Future Interests in Transferee: Class Gifts - Rule of Convenience
Under the rule of convenience, in the absence of express contrary intent, a class closes WHEN SOME MEMBER OF THE CLASS CAN CALL FOR DISTRIBUTION.
Rule Against Perpetuities
The RAP provides that certain kinds of future interests are void if there is ANY POSSIBILITY, that the interest might vest MORE THAN 21 YEARS years after a person alive at the time of the grant has died.
Rule Against Perpetuities: Which Interests Does This Apply To
RAP only applies to CONTINGENT REMAINDERS, EXECUTORY INTERESTS, and VESTED REMAINDERS SUBJECT TO OPEN
Rule Against Perpetuities: When Perpetuities Begins To Run
The time the perpetuities period begins to run depends on the instrument and the interest created.
For interests granted by WILL, it runs from the date of the TESTATOR’S DEATH.
For interests granted by DEED, it runs on the DATE OF DELIVERY
Rule Against Perpetuities: Lives in Being
Here, you are looking for a person ALIVE AT THE DATE OF CONVEYANCE whose life and/or death is relevant to the prescribed condition’s occurrence.
Rule Against Perpetuities: Exceptions
The RAP does not apply to: 1) vested remainders, and 2) charity-to-charity
Rule Against Perpetuities: Consequence of Violating RAP
A violation of the RAP destroys the offending interest, but the rest of the conveyance remains.
Rule Against Perpetuities: Common Pitfalls - Bright Line Rule
An EXECUTORY INTEREST that follows a defeasible fee, WITH NO TIME LIMIT on the time within which it must vest, violates RAP, and the executory interest is stricken.
Rule Against Perpetuities: Common Pitfalls - Age Contingency in Open Class
A gift to an open class conditioned on members surviving BEYOND 21 violates RAP. If the interest fails, the whole class gift will fail too.
Rule Against Perpetuities: Common Pitfalls - Options and Right of First Refusal + Rule Against Restraints on Alienation
Options or rights of first refusal that are NOT PERSONAL TO THE HOLDER (e.g., extended to holder’s heirs or assigns) WILL VIOLATE RAP because the might be exercised later than the end of the perpetuities period.
The modern rule for options or ROFR is the Rule Against Restraints on Alienation, which says an option or ROFT will be valid if it does not impose an UNREASONABLE RESTRAINT ON ALIENATION.
Rules to Class Gifts: Gift to Subclass Exception
Each gift to a subclass may be treated as a separate gift.
Rules to Class Gifts: Per Capita Gift Exception
A gift of a fixed amount to each member of a class is NOT treated as a class gift.
Trusts
A trust is a fiduciary relationship with respect to specific property where the trustee holds legal title to the property subject to enforceable equitable rights in a beneficiary, and the creator of the trust is the settlor.
Trusts: Application of Rules Against Perpetuities
The RAP applies to the equitable future interests of beneficiaries in trusts
Trusts: Creation
A trust can be created by will, inter vivos transfer, inter vivos declaration
Trusts: Charitable Trusts
A charitable trust MUST HAVE A CHARITABLE PURPOSE. The rules for charitable trusts differ in the following ways: (i) a charitable trust must have INDEFINITE BENEFICIARIES, (ii) it may be PERPETUAL, and (iii) the CY PRES DOCTRINE allows courts to select alternative charity when the purpose of the settlor become impracticable.
RAP Reform: Wait and See Doctrine
The validity of any suspect future interest is determined on the basis of the facts as they exist at the conclusion of the measuring life.
Rule Against Restraints on Alienation: Types of Restraints
1) Disabling, which attempted transfers are disabling (VOID),
2) Forfeiture, which an attempted transfer forfeits interest (VALID IF for a LIMITED TIME and REASONABLE PURPOSE), and
3) Promissory, which an attempted transfer breaches a covenant (VALID IF for a LIMITED TIME and REASONABLE PURPOSE).
Rule Against Restraints on Alienation: Restraints on Fee Simple
Absolute restraints on fee simple estate are VOID. Forfeiture and promissory restraints are valid if for a LIMITED TIME and REASONABLE PURPOSE.
Rule Against Restraints on Alienation: Discriminatory Restraints
Judicial enforcement of restraints prohibiting the transfer or use of property to a person with a specific race, religion, or ethnic group is DISCRIMINATORY STATE ACTION forbidden by the 14th amendment.
Rule Against Restraints on Alienation: Restraints on Life Estate
Forfeiture and promissory restraints on life estates are VALID, but disabling restraints are void.
Rule Against Restraints on Alienation: Restraints on Future Interests
Restraints on VESTED future interests are generally valid to the extent the restraints on present interests of the same type are valid.
