Present Estates & Future Interests

Question 1

What is a fee simple absolute?

Answer 1

A fee simple absolute is a present possessory estate of absolute ownership and indefinite or potentially infinite duration

Question 2

What are the distinguishing characteristics of a fee simple absolute

Answer 2

A fee simple absolute is freely transferable, devisable by will and descendible through intestacy

Question 3

How is a fee simple absolute created?

Answer 3

A fee simple absolute is created by language such as “to A” or “to A and his heirs”
* A fee simple absolute is presumed in the absence of express contrary intent

Question 4

What is a defeasible fee?

Answer 4

Defeasible fees are fee simple estates that can be terminated upon the happening of a stated event, meaning they are capable of forfeiture

Question 5

What are the three types of defeasible fees?

Answer 5

1. Fee Simple Determinable
2. Fee Simple Subject to Condition Subsequent
3. Fee Simple Subject to an Executory Interest

Question 6

What is a fee simple determinable?

Answer 6

A fee simple determinable is a present possessory estate that terminates upon the happening of a stated event and automatically reverts to the grantor

Question 7

What are the distinguishing characteristics of a fee simple determinable?

Answer 7

A fee simple determinable is transferable, devisable by will and descendible through intestacy

Question 8

How is a fee simple determinable created?

Answer 8

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…”

Question 9

What future interest accompanies a fee simple determinable?

Answer 9

A fee simple determinable creates the possibility of reverter in the grantor
* Whenever a grantor conveys a fee simple determinable, they automatically retain a possibility of reverter
* A possibility of reverter is transferable, devisable by will and descendible through intestacy

Question 10

What is a fee simple subject to condition subsequent?

Answer 10

A fee simple subject to condition subsequent is a present possessory estate in which the grantor reserves the right to terminate the estate upon the happening of a stated event
* The estate does NOT automatically terminate upon the occurrence of such event; the grantor must take some action to terminate the estate

Question 11

How is a fee simple subject to condition subsequent created?

Answer 11

A fee simple subject to condition subsequent is created by (1) the use of conditional language, such as “upon condition that,” “provided that,” “but if,” or “and if that happens,” and (2) an explicit statement of the grantor’s right to re-enter

Question 12

What are the distinguishing characteristics of a fee simple subject to condition subsequent?

Answer 12

A fee simple subject to condition subsequent is transferable, devisable by will and descendible through intestacy

Question 13

What future interest accompanies a fee simple subject to condition subsequent?

Answer 13

The future interest accompanying a fee simple subject to condition subsequent is a right of entry (also called a power of termination), which must be expressly reserved
* The majority of courts hold that a right of entry is NOT transferable inter vivos, but they ARE devisable by will
* All states agree that a right of entry is descendible through intestacy

Question 14

What is a fee simple subject to an executory interest?

Answer 14

A fee simple subject to an executory interest is a present possessory estate that terminates upon the happening of a stated event and automatically reverts to a third party

Question 15

How is a fee simple subject to an executory interest created?

Answer 15

A fee simple subject to condition subsequent is created by language providing that a third party will take upon forfeiture of a fee simple estate

Question 16

What are the distinguishing characteristics of a fee simple subject to an executory interest?

Answer 16

A fee simple subject to an executory interest is transferable, devisable by will and descendible through intestacy

Question 17

What future interest accompanies a fee simple subject to an executory interest?

Answer 17

A shifting executory interest accompanies the fee simple subject to an executory interest

Question 18

What is a restraint on alienation?

Answer 18

A restraint on alienation purports to restrict the transferability or alienability of a legal interest in real property

Question 19

What are the three types of restraints on alienation?

Answer 19

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
3. promissory restraints, under which an attempted transfer breaches a covenant

Question 20

What types of restraints on alienation are permissible?

Answer 20

A disabling restraint on any legal interest is VOID
* Forfeiture and promissory restraints may be valid, depending on the nature of the restraint and the interest involved

Question 21

When may forfeiture or promissory restraints on fee simple estates be upheld?

Answer 21

Forfeiture or promissory restraints on fee simple estates for a limited time and reasonable purpose may be upheld

Question 22

What is a life estate?

Answer 22

A life estate is a present possessory estate measured by the life or lives of one or more persons
* The usual life estate is measured by the life of the grantee
* A life estate pur autre vie is measured by a life other than the grantee

Question 23

What are the future interests accompanying a life estate?

Answer 23

• If the future interest is held by the grantor, it is called a reversion
• If the future interest is held by a third party, it is called a remainder

Question 24

What are the future interests capable of creation in the grantor?

Answer 24

There are three future interests capable of creation in the grantor:
1. the possibility of reverter
2. the right of entry (power of termination)
3. the reversion

Question 25

What is a reversion?

Answer 25

A reversion is the future interest in a grantor who conveys less than they own
* A reversion arises by operation of law and does NOT have to be expressly reserved
* A reversion is transferable, devisable and descendible

Question 26

What are the future interests capable of creation in someone other than the grantor?

Answer 26

1. A contingent remainder
2. An indefeasibly vested remainder
3. A vested remainder subject to total divestment
4. A vested remainder subject to open
5. A shifting executory interest
6. A springing executory interest

Question 27

What is a remainder?

Answer 27

A remainder is a future interest in a third person that can become possessory on the natural expiration of the preceding estate
* A remainder CANNOT divest a prior estate or follow a time gap after the preceding estate
* A remainder must be expressly created in the instrument creating the preceding possessory estate

Question 28

What is a contingent remainder?

Answer 28

A remainder is contingent if it is (1) created in unborn or unascertained persons or (2) subject to a condition precedent, or both

Question 29

What is a vested remainder?

Answer 29

A vested remainder is one created in an existing and ascertained person and NOT subject to a condition precedent

Question 30

What is an indefeasibly vested remainder?

Answer 30

An indefeasibly vested remainder is a vested remainder that is NOT subject to divestment or diminution

Question 31

What is a vested remainder subject to total divestment?

Answer 31

A vested remainder subject to total divestment is a vested remainder that is subject to a condition subsequent

Question 32

What is a vested remainder subject to open?

Answer 32

A vested remainder subject to open is a vested remainder created in a class of persons (e.g., “children”) that is certain to become possessory, but is subject to diminution because additional persons may still join the class

Question 33

When does a “class” close?

Answer 33

To determine whether a particular class has closed, courts apply the rule of convenience, which provides that, in the absence of express contrary intent, a class closes when any member of the class can demand possession

Question 34

What is an executory interest?

Answer 34

Executory interests are future interests in third parties that either (1) divest a transferee’s preceding freehold estate, (2) follow a gap in possession, or (3) cut short a grantor’s estate

Question 35

What is a shifting executory interest?

Answer 35

A shifting executory interest always follows a defeasible fee and cuts short the interest of someone other than the grantor

Question 36

What is a springing executory interest?

Answer 36

A springing executory interest cuts short the interest of the grantor

Question 37

What is the Rule Against Perpetuities?

Answer 37

The Rule Against Perpetuities provides that certain future interests are void if there is any possibility that the interest might vest more than 21 years after a person alive at the time of the grant has died

Question 38

What future interests are subject to the Rule Against Perpetuities?

Answer 38

The Rule Against Perpetuities applies only to:
1. contingent remainders
2. vested remainders subject to open
3. executory interests
4. options to purchase
5. rights of first refusal

Question 39

When does the perpetuities period begin to run?

Answer 39

The time the interest is created and the perpetuities period begins to run depends on the instrument and interest created
* For interests granted by will, it runs from the date of the testator’s death
* For interests created by deed, it runs from the date of delivery
* For interests created by irrevocable trust, it runs from the date of creation
* For interests created by revocable trust, it runs from the date it becomes irrevocable

Question 40

When does an interest “vest” for purposes of the Rule Against Perpetuities?

Answer 40

An interest vests for purposes of the Rule Against Perpetuities when it becomes (1) possessory or (2) an indefeasibly vested remainder or a vested remainder subject to total divestment

Question 41

What “lives in being” are used for purposes of the Rule Against Perpetuities?

Answer 41

Unless other measuring lives are specified, one connected with the vesting of the interest is used, meaning a person alive at the time the interest was created whose life and/or death is relevant to the prescribed condition’s occurrence

Question 42

What are the consequences of violating the Rule Against Perpetuities?

Answer 42

Violation of the Rule Against Perpetuities destroys only the offending interest