Present Estates and Future Interests Flashcards
Estates in land are possessory interests in land. These interests may be possessory now (____ estates), or they may become possessory in the future (____ interests).
present; future
Three categories of present possessory freehold estates:
- Fee simple absolute
- Defeasible fee (of which there are three types)
- Life estate
Fee Simple Absolute - How to create
“To A” or “To A and his heirs.”
- Today, a fee simple is presumed in the absence of express contrary intent (that is, the common law words “and his heirs” are not necessary)
Fee Simple Absolute - Distinguishing Characteristics
absolute ownership of indefinite or potentially infinite duration. It’s freely transferable, devisable by will, and descendible through intestacy.
What interest do A’s heirs have in fee simple absolute conveyed “to A and his heirs” if A is still alive?
Nothing! A living person has no heirs
Defeasible fees are fee simple estates (that is, they are of uncertain or potentially infinite duration) that ____
can be terminated upon the happening of a stated event.
Type of defeasible fees
- Fee Simple Determinable (and Possibility of Reverter)
- Fee Simple Subject to Condition Subsequent (and Right of Entry)
- Fee Simple Subject to an Executory Interest
A fee simple determinable ____
terminates upon the happening of a stated event and automatically reverts to the grantor.
A fee simple determinable - how created
A fee simple determinable is created by durational language, such as “to A for so long as…,” “to A while…,” “to A during…,” or “to A until….”
Statements of ____ do not create a determinable fee
mere desire, hope, aspiration, expectation, or motivation
–> Words limiting the duration of the estate must be used
The fee simple determinable, like all of the defeasible fees, is transferable, devisable by will, and descendible through intestacy, but ____
always subject to the attached condition.
For fee simple determinable if the
stated condition is violated, forfeiture is ____
automatic.
Accompanying Future Interest in Grantor for fee simple determinable is:
Possibility of Reverter
re alienability = a possibility of reverter is ____
transferable, devisable by will, and descendible by intestacy.
A fee simple subject to a condition subsequent is an estate in which the grantor ____
reserves the right to terminate the estate upon the happening of a stated event, meaning the estate doesn’t automatically terminate—the grantor must take some action.
A fee simple subject to a condition subsequent - how created
(1) the use of conditional words, such as “upon condition that,” “provided that,” “but if,” and “if it happens that,” and
(2) an explicit statement of the grantor’s right to re-enter.
The fee simple subject to condition subsequent is ____ terminated if the stated condition occurs.
not automatically
Accompanying Future Interest in Grantor for fee simple subject to condition subsequent
Right of Entry
Most courts hold that rights of entry are
____ inter vivos, but most states agree they are ____, and all states agree they are ____
not transferable; devisable by will; descendible through intestacy.
A conveyance that contains both durational language and a power of termination will likely be construed as creating a ____, because ____
fee simple subject to a condition subsequent
the forfeiture is optional at the grantor’s election rather than automatic = Policy disfavors forfeiture of estates.
Fee Simple Subject to an Executory Interest
If a fee simple estate terminates upon the happening of a stated event (because it is determinable or subject to a condition subsequent) and then passes to a third party rather than reverting to the grantor or giving the grantor a right to terminate, the third party has an executory interest.
Fee Simple Subject to an Executory Interest - how created
Look for a third party who will take upon forfeiture of a fee simple estate
Fee Simple Subject to an Executory Interest - Distinguishing Characteristics
This estate is just like the fee simple determinable, only now, if the condition occurs, the estate is automatically forfeited in favor of someone other than the grantor.
Fee Simple Subject to an Executory Interest - Accompanying Future Interest
shifting executory interest
Courts disfavor restrictions on free land use and won’t find a defeasible fee unless ___
clear, durational language is used.
An absolute restraint on alienation is an _____ that is not linked to any reasonable time-limited purpose.
absolute ban on the power to sell or transfer
Absolute restraints on alienation of a fee simple are ____
void.
Conditions or limitations that violate public policy generally are ____ and the grantee takes ____
struck down; free of the restraint.
If the purpose of the condition is to ____, it likely will be struck down. However, if the purpose is to give support until ____, it likely will be upheld.
penalize marriage or encourage divorce; marriage or in the event of divorce
The fee tail is an estate where inheritability is limited to ____.
It’s created by the words “to A and the heirs of his body.” Most jurisdictions
have abolished the fee tail, and an attempt to create one results in ___
lineal heirs; a fee simple.
A life estate is one measured by ____
the life or lives of one or more persons.
Life estate - how created
The life estate is an estate that must be measured in explicit lifetime terms, and never in terms of years.
Life Estate Pur Autre Vie (Life of Another)
A life estate “pur autre vie” is measured by a life other than the grantee’s
A life estate pur autre vie also results when the life tenant ____
conveys their life estate to another
Life tenant - Accompanying Future Interest (Grantor vs. third party)
- If the future interest is held by O = called a reversion
- If held by a third party = called a remainder.
The life tenant is entitled to all ___ uses and profits from the land.
ordinary
The life tenant must not commit
waste (all three types)
A life tenant thus can’t do anything that injures the interests of a remainderman or holder of the reversion. A future interest holder may ____, and if they spend money to perform the life tenant’s obligations, they are entitled to reimbursement.
sue for damages or to enjoin such acts
A life tenant depleting a property’s natural resources could constitute ____
voluntary waste.
Exploitation of natural resources (for example, minerals) by a life tenant is generally limited to situations when:
(1) necessary for repair or maintenance
of the land;
(2) the land is suitable only for such use; or
(3) it’s expressly or impliedly permitted by the grantor
For life estates under the 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 the mines already open.
A life tenant is obligated to:
- Preserve the land and structures in a reasonable state of repair
- Pay ordinary taxes on the land.
- Pay interest on mortgages (not principal) AND
- Pay special assessments for public improvements of short duration (improvements of long duration are apportioned between the life tenant and future interest holder)
A life tenant is not obligated to: to and is ____
- insure the premises for the benefit of remaindermen
- Pay for damages caused by a third-party tortfeasor
For a life tenant the obligation to oay “ordinary” taxes is limited to the extent of the ____ generated from the land since the life tenant acquired ownership
total income or profits
If there’s no income or profit, the life tenant is required to pay all ordinary taxes only to the extent of the premises’ ____.
fair rental value
-> when no income or profits are coming in from the land, the life tenant’s tax liability for the parcel will be computed not on the basis of Blackacre’s fair market value but instead on the basis of its mere fair rental value (a considerably lesser sum).
The life tenant can’t engage in acts that will enhance the property’s value, unless ____
all future interest holders are known and consent
Notwithstanding the common law’s recognition of ameliorative waste, note that today a life tenant may alter or even demolish existing buildings if:
- The market value of the future interests is not diminished; and either
–> A. The remaindermen do not object; or
–> B. A substantial and permanent change in the neighborhood conditions (for example, change from residential to 90% industrial) has deprived the property in its current form of reasonable productivity or usefulness.
Unlike life estate holders Leasehold tenants ____ even if the neighborhood has changed and the market value of the premises was increased.
remain liable for ameliorative waste
If the land is practically worthless in its present state, the life tenant may seek a ____, the proceeds of which are put in trust with income paid to the life tenant.
partition sale
If a life tenant who receives the estate by will or intestacy renounces their interest, the future interest following the life estate is generally ____
accelerated so that it becomes immediately possessory.
Despite the fact that possession is in the future, a future interest is a ____, legally protected right in
property.
present
If a future interest is held by a transferor, it must be:
(1) a possibility of reverter; (2) a right of entry; or (3) a reversion
If a future interest is held by someone other than the transferor,
it must be:
(1) a contingent remainder; (2) a vested remainder (of which
there are three types, discussed below); or (3) an executory interest (of which there are two types)
A ____ is the estate left in a grantor who conveys less than they own
reversion
The reversion arises by ____; it does not have to be expressly reserved.
operation of law
re alienability: A reversion is ____
transferable, devisable by will, and inheritable.
Types of vested remainders
(1) the indefeasibly vested remainder,
(2) the vested remainder subject to complete defeasance (also known as the vested remainder subject to total divestment), and
(3) the vested remainder subject to open
Types of executory interest
(1) the shifting executory interest, and
(2) the springing executory interest
A remainder is a future interest in a ____ that can become possessory on ____
third person; the natural expiration of the preceding estate.
A remainder must be ____ in the instrument creating the preceding possessory estate.
expressly created
Remainders are either ____
vested or contingent.
A third party doesn’t have a remainder where there is
a gap in time between the shorter estate and the third parties interest
Ex: O conveys “to A for life, then to B and his heirs one day after A’s death.” B does not have a remainder (because there is a gap).
Eemainders always accompany a _____
preceding estate of known, fixed duration
A remainder ____ cuts short or divests the prior taker.
never
Because a remainder cannot “cut short” a preceding estate, it can never follow a _____ estate, which is of potentially infinite
duration.
fee simple
A remainder is contingent if:
(1) it’s created in unborn or unascertained persons, or
(2) it’s subject to a condition precedent, or both.
-> In other words, a remainder may be contingent as to person or as to event
A remainder created in unborn or unascertained persons is contingent because ____
until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends.
A condition is precedent if it must be ____
satisfied before the remainderman has a right to possession.
For condition subsequents look for the condition to appear ____ the language creating the remainder or for it to be ____ to theremainderman.
before; woven into the grant
If there is an alternative future interest if a condition subsequent is not met it is called
alternative contingent remainders
Technical Rules of the Common Law that have been abolished in most jurisdictions inlclude:
- Destructibility of Contingent Remainders: a contingent remainder was destroyed if it
failed to vest before or upon the termination of the preceding
freehold estate. - Rule in Shelley’s Case (Rule Against Remainders in Grantee’s Heirs): if the same instrument created a life estate in A and gave the remainder only to A’s heirs, the remainder was not recognized, and A took the life estate and the remainder.
- Doctrine of Worthier Title (Rule Against Remainders in
Grantor’s Heirs): Under the Doctrine of Worthier Title (“DOWT”), a remainder in the grantor’s heirs is invalid and becomes a reversion in the grantor.
A vested remainder is one created in an ____ person, and not subject to a ____.
existing and ascertained; condition precedent
Types of vested remainders
(1) the indefeasibly vested remainder;
(2) the vested remainder subject to total divestment (also known as
the vested remainder subject to complete defeasance); and
(3) the vested remainder subject to open.
An indefeasibly vested remainder is a vested remainder that is ____
not subject to divestment or diminution.
-> diminution. The holder of this remainder is certain to acquire an estate in the future, with no strings or conditions attached.
Vested Remainder Subject to Total Divestment/Condition Subsequent the remainderman is not subject to any condition precedent but his right to possession ____
could be cut short because of a condition subsequent.
It’s important to know the difference between a condition
precedent, which creates a ____, and a condition subsequent, which creates a ____
contingent remainder; vested remainder subject to total divestment
To tell the difference between a condition subsequent/precedent apply the ____
Comma Rule
Comma Rule: When conditional language in a transfer follows language that, taken alone and set off by commas, would create a vested remainder, the condition is a condition _____, and you have a _____.
subsequent; vested remainder subject to complete defeasance
Where language is ambiguous, the preference is for vested remainders subject to divestment rather than
_____
contingent remainders or executory interests.
c. Vested Remainder Subject to Open
This is a vested remainder created in a class of persons (for example, “children”) that is certain to become possessory, but is subject to diminution
A class gift of a remainder may be ____ (where at least one group member exists) or ___ (where all group members are unascertained).
vested subject to open; contingent
A “class” is a group of persons having a ___
common characteristic
A class is open when it’s _____ in. A class is closed when ____
still possible for others to join; no others can join in.
To figure out whether a given class has closed, we apply the ____
rule of convenience
Under the rule of convenience, in the absence of express contrary intent, a class closes (that is, no one born after that time may share in the gift) when ____
some member of the class can call for distribution of their share of the class gift.
The womb rule
persons in gestation at the time the class closes are included in the class
T’s will devises the residue of his estate “to those of A’s children who attain age 21.” If any of A’s children is 21 at T’s death, the class closes at that time. Otherwise it closes when ____
one of A’s children reaches age 21.
Survival of a class member to the time of closing is usually ____ to share in a future gift—unless survival was ____
unnecessary; made an express condition
Executory interests are future interests in ____
third parties
Executory interests are future interests in third parties that either
divest a transferee’s preceding freehold estate (“_____”),
or follow a gap in possession or cut short a grantor’s estate
(“____”).
shifting interests; springing interests
You can distinguish executory interests by remembering they must take effect by cutting short some interest– either in another person (____) or in the grantor or the grantor’s heirs (____)
shifting; springing
A shifting executory interest always follows a ____ and cuts short someone other than the grantor.
defeasible fee
A springing executory interest cuts short the interest of ____
the grantor.
Re alienability: Vested remainders are _____
fully transferable, descendible by intestacy, and devisable by will.
At common law, contingent remainders and executory interests were not transferable _____, but most courts today hold that they are freely transferable.
inter vivos
Contingent remainders and executory interests are descendible and devisable, provided ____
survival is not a condition to the interest’s taking.
Any future interest that is transferable is subject to involuntary transfer; that is, it is reachable by ____
creditors.
The Rule Against Perpetuities (“RAP”) provides that certain kinds of future interests are void if ____
there is any possibility, however remote, that the interest might vest more than 21 years after a person alive at the time of the grant has died.
The Rule Against Perpetuities applies only to ____
contingent remainders, executory interests, vested remainders subject to open, options to purchase, and rights of first refusal.
The grantor’s interests (reversions, possibilities of reverter, rights of entry) are safe from the _____
Rule Against Perpetuities
The time the interest is created and the perpetuities period begins to run depends on ____
the instrument and the interest created.
When the RAP time starts running:
For interests granted by will, it runs from the date of ____
Dor deeds, it is ____.
The period runs on an irrevocable trust from ____; it runs on a revocable trust from the date _____.
the testator’s death
the date of delivery
the date it is created; it becomes irrevocable
An interest vests for purposes of the Rule when it becomes:
(1) possessory, or
(2) an indefeasibly vested remainder or a vested remainder subject to total divestment.
In analyzing Rule Against Perpetuities problems, keep in mind that the key is when the interest could ____—not when it’s likely to vest or even when it did
possibly vest
-> If there’s any possibility that it could vest beyond the period, it’s void.
For the RAP you must examine the grant as of the time of ____ and be sure that if the interest vests it will be within the period of the Rule
its creation
Unless other measuring lives are specified, one connected with the ____
vesting of the interest is used.
Except for vested remainders subject to open, the Rule Against
Perpetuities does not apply to ____
vested interests.
Other exceptions to the RAP (not future interests in the grantor/vested)
- charity-to-charity exception
- options to purchase held by a current tenant.
Violation of the RAP destroys only ____
the offending interest.
FOUR STEP TECHNIQUE FOR ASSESSING POTENTIAL RULE AGAINST PERPETUITIES PROBLEMS
- Step 1 – Determine the Interests
- Step 2 – How Does the Future Interest Holder Take?
- Step 3 – Find the Measuring Life
- Step 4 – When Will We Know If the Future Interest Holder Can Take?
Bright Line Rule: An executory interest that follows a defeasible fee, with ____ violates the Rule Against Perpetuities, and the executory interest is stricken.
no limit on the time within which it must vest
When a void interest is stricken, the interests are classified as if ____
the void interest were never there.
A gift to an open class conditioned on members surviving beyond ____ violates the Rule.
age 21
-> Some states have enacted perpetuities reform legislation that
reduces such age contingencies to 21.
If the interest of any class member may vest too remotely, the ____ fails.
whole class gift
–> For the class gift to vest, the class must be closed and all conditions precedent must be satisfied for every member.
Fertile Octogenarian for RAP
A woman is conclusively presumed to be capable of bearing children, regardless of her age or medical condition.
-> Note, some states alter by statute or medical testimony regarding a woman’s childbearing
capacity is admissible in these states.
Unborn Widow or Widower
Because a person’s widow (or widower) is not determined until their death, it may turn out to be someone who was not in being at the time of the disposition.
-> Note, Where necessary to sustain a gift, a few state statutes raise a presumption that any reference to a person’s spouse, widow, or widower is to a person in being at the time of the transfer.
A gift conditioned on an administrative contingency (for example, admission of will to probate) ____ the RAP.
violates
Options or rights of first refusal that are not personal to the holder (that is, which are extended to the holder’s heirs and assigns) will ___ the RAP because ____
violate; they might be exercised later than the end of the perpetuities period.
Rule Against Perpetuities does not apply to options to purchase held by the ____
current lessee
–> but it does apply to a former
tenant and to any party to whom the current tenant might transfer the option separately from the lease
Under modern authorities, the ___ is applied to options and rights of first refusal rather than the Rule
Against Perpetuities. An option or right of first refusal will thus be
valid if _____
Rule Against Restraints on Alienation; it does not impose an unreasonable restraint on alienation.
A significant minority of courts will also construe an option or right of
first refusal as ____ to avoid invalidating the interest.
lasting only for a reasonable time
Each gift to a ____ may be treated as a separate gift under the RAP
subclass
A gift of a ____ to each member of a class is not treated as a class gift under the Rule.
fixed amount
A trust is a fiduciary relationship with respect to specific property (res) wherein the ____ holds legal title to the property subject to _____
trustee; enforceable equitable rights in a beneficiary.
The creator of a trust is
the settlor, who must _____
own the property at the time of trust creation and must have had the intent to create the trust.
The Rule Against Perpetuities applies to the equitable future interests of the ____ just as it does to “legal” future interests.
beneficiaries in a private trust
A trust can be created by _____
will (testamentary trust), inter vivos transfer of the trust res, or inter vivos declaration that the settlor is holding property in trust.
All trusts of ____ must be in writing
real property
A charitable trust must have a ____ purpose
charitable
The rules governing charitable trusts differ from those applicable to private trusts in three important ways:
(1) a charitable trust must have indefinite beneficiaries;
(2) it may be perpetual (that is, the Rule Against Perpetuities does not apply); and
(3) the cy pres doctrine, which allows a court to select an alternative charity when the purpose of the settlor becomes impracticable or impossible, applies.
REFORM OF THE RAP
- “Wait and See” or “Second Look” Doctrine
- The Uniform Statutory Rule Against Perpetuities (USRAP)
- Cy Pres Doctrine (“As Near As Possible”)
“Wait and See” or “Second Look” Doctrine
Under this majority reform effort, the validity of any suspect future interest is determined on the basis of the facts as they exist at the conclusion of our measuring life.
The Uniform Statutory Rule Against Perpetuities (USRAP)
This codifies the common law RAP and, in addition, provides for an alternative 90-year vesting period.
Cy Pres Doctrine (“As Near As Possible”)
Some reform measures allow a court to reform invalid interests. If a
given disposition violates the rule, a court may reform it in a way that most closely matches the grantor’s intent, while still complying with the RAP.
Generally, any restriction on the transferability of a legal (as opposed to equitable) interest is ____
void.
There are three types of restraints on alienation:
(1) disabling restraints, under which attempted transfers are ineffective; (2) forfeiture restraints, under which an attempted transfer forfeits the interest; and
(3) promissory restraints, under which an attempted transfer breaches a covenant.
A disabling restraint on any legal interest is ___
void.
Forfeiture and promissory restraints may be ___, depending on the nature of the restraint and the interest involved.
valid
All absolute restraints on fee simple
estates are ____.
void
–> thus, any such restriction falls away and the grantee may freely transfer the property.
Forfeiture or promissory restraints on fee simple estates for a ____ may be upheld
limited time and reasonable purpose
Disabling restraints
attempted transfers are ineffective
Forfeiture restraints
an attempted transfer forfeits the interest
Promissory restraints
an attempted transfer breaches a covenant.
Judicial enforcement of restraints prohibiting the transfer or use of property to or by a person of a specified ____ is discriminatory state action forbidden by the Fourteenth Amendment.
racial, religious, or ethnic group
____ restraints on life estates are valid, but ____ restraints are void.
Forfeiture and promissory; disabling
The Rule Against Restraints on Alienation applies only to ___ interests. Restraints on the alienation of ____ interests are valid.
legal equitable
Restraints on vested future interests generally are valid to the extent that restraints on ____
present interests of the same type are valid.
The following are valid restraints on alienation:
- Reasonable restrictions in commercial transactions
- Reasonable options and rights of first refusal
- Restrictions on assignment and sublease of leaseholds (for example, requiring landlord’s consent)
