Present Estates and Future Interests

Question 1

What is the difference in the estate that arises from a lease and an ownership estate?

Answer 1

An estate with legal title is a “freehold estate”

An estate that gives mere possession is a “nonfreehold” like a lease

Question 2

“To A and his heirs”

If A is alive, what does A have? A’s heirs have?

Answer 2

A has a fee simple absolute.

A’s heirs have nothing because a living person has no heirs

Question 3

Types of indefeasible estate

Answer 3

Fee simple absolute and life estate

Question 4

Possible future interests associated with a life estate

Answer 4

Reversion (to grantor) or Remainder (to third party)

Question 5

When is a reversion created?

Answer 5

When a grantor transfers a shorter estate than he owns other than a FSD and FSstCS.
If contingent remainder never vests then grantor has reversion

Question 6

What is a remainder interest?

Answer 6

follows a life estate or a term of years and is an interest in a third party that becomes possessory at the natural end of the life estate (never follows a defeasible fee and there is never a gap after the life estate and before the remainder)

Can be contingent or vested

Question 7

What is a fee simple determinable?

Answer 7

A type of defeasible fee that creates a possibility of reverter in the grantor. (automatic revert to grantor)

Question 8

What are the three types of defeasible fee?

Answer 8

FSD, FSstCS, and FSstEI

Question 9

What is a FSstCS?

Answer 9

conditional language followed by a reservation of a right to reenter (grantor must exercise the right of reentry)

Question 10

What is a fee simple subject to an executory interest?

Answer 10

It is a type of defeasible fee that is cut short by the occurrence of some event. Forfeiture is automatic

Question 11

What are the two types of executory interest?

Answer 11

Shifting = divests preceding defeasible fee of a 3rd party 
Springing = cuts short the grantor's interest

Question 12

Executory interests are future interests in third parties that either…

Answer 12

1) Divest a transferee’s preceding prehold (shifting)
2) follow a gap in possession (remember a remainder can never follow a gap in possession - an executory can)
3) Cut short the grantor’s interest (springing)

Question 13

Is a reversion devisable. descendable, or transferrable?

Answer 13

Yes - all of these

Question 14

Is a vested remainder devisable. descendable, or transferrable?

Answer 14

Yes - all of these

Question 15

Is a contingent remainder devisable. descendable, or transferrable?

Answer 15

is descendable and devisable
is transferrable only if the court follows the modern rule

Question 16

Is a fee simple determinable devisable. descendable, or transferrable?

Answer 16

Yes - all of these

Question 17

Is a possibility of reverter devisable. descendable, or transferrable?

Answer 17

Yes - all of these

Question 18

Is a right of reentry devisable. descendable, or transferrable?

Answer 18

Devisable and descendable but not transferrable

Question 19

Is an executory interest devisable. descendable, or transferrable?

Answer 19

Devisable and descendable

Transferrable if court follows the modern rule

Question 20

what are the types of remainder?

Answer 20

Contingent remainder
Indefeasibly vested remainder
Vested Remainder subject to complete defeasance
Vested remainder subject to open

Question 21

what is a contingent remainder?

Answer 21

A remainder that is either created:

• in an unborn or unascertained person or
• is subject to condition precedent

Question 22

If an interest is created “to A for life then to B’s heirs” and B is alive, what kind of an interest do A and B have?

Answer 22

A has a life estate

B’s heirs have a contingent remainders subject to open. The remainder is contingent because both of the heirs could predecease A and the remainder is open because B could have more heirs

Question 23

What are the 3 types of waste that a life tenant can commit?

Answer 23

Voluntary

Permissive

Ameliorative

Question 24

What is included under Voluntary Waste?

Answer 24

actual/overt conduct that causes a drop in value

Depleting the property’s natural resources is a type of voluntary waste UNLESS:

1) it’s necessary for repair/maintenace of the land
2) the land is only suitable for such use
3) It’s expressly or impliedly permitted by the grantor
4) Open mines doctrine applies

Question 25

What is included under Permissive Waste?

Answer 25

Neglect - failure to perform the duties of a life tenant

Life tenants must:

1) Preserve the land and structures in a reasonable state of repair
2) Pay ordinary taxes (limited to the extent of income from the land or if no income then tax liaboility limited to the tax liability computed on the rental value)
3) Pay interest but not principal on mortgages
4) Pay special assessments of short duration

*No obligation to insure for the benefit of remainderman and not responsible for damages caused by a third party tortfeasor

Question 26

What is included under Ameliorative Waste?

Answer 26

A change that increases the value of the property. Life tenant cannot engage in acts that will increase the property’s value unless all future interest holders are known and consent.

BUT a life tenant can alter or demolish buildings IF:

1) FMV of the future interests is not dimished AND EITHER

2A) remainderman do not object OR

2B) A substantial and permanent change in the neighborhood conditions has deprived the property in its current form of reasonable productivity or usefulness

Question 27

What is created by “to A for 30 years if she lives that long”?

Answer 27

Creates a leasehold estate (life estate must be measured in explicit lifetime terms)

Question 28

What is an indefeasibly vested remainder?

Answer 28

holder is certain to acquire with no strings attached

Question 29

What is a vested remainder subject to complete defeasance?

Answer 29

Remainderman is known but a condition subsequent is attached that could strip the remainder man of possession after initial possession (but no condition precedent)

Question 30

What is a vested remainder subject to open?

Answer 30

The remainder man is a class of takers at least one of whom is eligible to take but each member’s share can get smaller because the class can grow larger

The class closed under the rule of convenience (absent express intent to the contrary) when any member of the class can call for a distribution/demand possession

If a class predeceases the life tenant, their share will go to their heirs/devisees (unless survival was an express/implied condition)

Question 31

what is the RAP

Answer 31

A future interest must vest if at all within 21 years after the end of a life in being

Question 32

To what future interests does the RAP apply?

Answer 32

1) Vested Remainders subject to Open
2) Contingent Remainders
3) Executory Interests
4) Rights of First Refusal (more commonly tested than you’d think)
5) Options to purchase
(Grantor’s future interests are safe)

Question 33

When does an interest vest for purposes of RAP?

Answer 33

when it becomes possessory, an indefeasibly vested remainder or a vested remainder subject to total divestment

Question 34

What are 2 sexy exemptions to RAP?

Answer 34

1) Does not ally to dispositions from one charity to another
2) Does not apply to option to purchase held by a current tenent

Question 35

what are the 4 steps to solve a RAP problem?

Answer 35

1) Determine the future interest
2) What needs to happen for the future interest holder to takeD?
3) Find the measuring life (look for people alive at the time of the conveyance whose lives/deaths are relevant to the future interest holder taking)
4) When will we know if the future interest holder can take? (if within 21 years after the death of a life in being, you’re good)

Question 36

what are the two key bright line RAP violations?

Answer 36

1) Executory interest with no time limit imposed on its duration
2) Age contingency beyond age 21 in an open class (bad as to one, bad as to all says that if any class member’s interest may vest too remotely, then the entire gift fails.) For the class gift to vest, the class must be closed and all conditions precedent must be satisfied for every member

Question 37

What kinds of restraints on alienation are void and which ar valid

Answer 37

Invalid: Absolute restraints on alienation, conditions or limitations that penalize marriage or encourage divorce (but if the purpose is to give support until marriage or in the event of divorce, then it’s fine)

Valid: Rights of first refusal and restraints on alienation that are for a limited time and for some time-limited purpose

Question 38

What are the 3 kinds of restraints on alienation?

Answer 38

1) Disabling restraints (attempted transfers are ineffective) Always invalid
2) Forfeiture Restraints (attempted transfers cause forfeiture)
3) Promissory Restraints (attempted transfers breach a covenant)

Forfeiture and Promissory Restraints are valid if for a limited time and a reasonable purpose. Forfeiture and Promissory Restraints are always valid on life estates

Question 39

What does an attempt to create a fee tail create?

Answer 39

A fee simple

Question 40

What is a vested remainder?

Answer 40

It is a remainder created in an existing and ascertained person and not subject to a condition precedent.

Can be either an indefeasibly vested remainder, vested remainder subject to complete defeasance, or a vested remainder subject to open

Question 41

What is an easy way to analyze a RAP issue in the context of a right of first refusal?

Answer 41

If the right of first refusal is held by an ascertaintable person (and not their heirs and assigns), then there is not a RAP problem