Property - Estates & Future Interests Flashcards
1
Q
What is an estate?
A
A present possessory interest which grants the holder a bundle of rights concerning the house and land of real property.
An estate is a temporal slice of ownership rights in relation to a parcel of land.
2
Q
What is a future interest?
A
The right to future possession of real property.
3
Q
What are the two types of estates?
A
Freehold estates
Non-freehold estates
4
Q
What are freehold estates?
A
Estates of indefinite duration that can exist for a lifetime or forever. They are heritable.
5
Q
What are the types of freehold estates?
A
- Fee simple absolute - permanent ownership, the dominant estate
- Fee simple defeasibles (variants of FSA):
- Fee simple determinable
- Fee simple subject to a condition subsequent
- Fee simple subject to an executory limitation - Life estate - possession for the duration of a life.
- Fee tail - almost extinct
6
Q
What are non-freehold estates?
A
The modern equivalent is the leasehold between a landlord and tenant. They are not heritable. A nonfreehold estate holder has a right to possession.
7
Q
What is fee simple absolute?
A
The holder has all the rights in the bundle of sticks for a potentially infinite duration. There is no future interest accompanying FSA. It is the default conveyance in the modern age. Use of FSA protects market efficiency and favors free alienation. Free alienability is core to the FSA.
The words of limitation which conveys the interest to that persons heirs are: “and their heirs”
8
Q
What does a FSA conveyance look like?
A
O to A (words of purchase) and his/her heris (words of limitation)
9
Q
What are the characteristics of FSA?
A
- Freely alienable - it can be sold or given away during the owner’s lifetime
- Devisable - it can be transferred by will at death
- Descendible - it can pass by intestate succession if the owner dies without a will.
10
Q
What is the order of descendability for FSA?
A
Descendible only through intestate succession. The order is:
- Issue (linear descendants) and surviving spouse - it is split between any of the above
- Parents and their issue - parents first, then their issue
- Ancestors and collaterals (other persons related by blood)
- Escheat - if there are no living relatives, then the property belongs to the state
11
Q
What is a core component of the FSA and why?
A
Free alienability
Utilitarian theory holds that free alienability ensures productive use of land.
12
Q
What are the restraints on an FSA?
A
Partial restraints - must be reasonable in duration scope and purpose
Absolute restraints - restraints prohibiting future transfer (these are void outright)
13
Q
What are the partial restrainits on FSA?
A
- Disabling restraint - disables the ability of the transferee to transfer their interest to someone else.
- Forfeiture restraint - any attempt to transfer their interest results in forfeiture of the title
- Promsiorry restraint - a promise by the transferee to transfer their interest to someone else
14
Q
What is a life estate?
A
A life estate is a possessory interest which lasts as long as the lifetime of a particular person, when that person dies the estate terminates
15
Q
What language is used to create a life estate?
A
O to A:
For life
Until _ dies
While _ is alive
16
Q
What is a life estate pur autre vie?
A
A life estate based on the life of another.
When someone with a life estate sells their life estate, the new holder has a life estate in the transferee. Or in other words, pur autre vie.
17
Q
What can life estates NOT be transferred to?
A
Life estates cannot be treansferred to businesses or corporations because they have potentially limitless lifetimes. Such a conveyance will be immediately void.
18
Q
How can a life estate be passed on?
A
It is alienable, but not devisable or descendible, except in the case of a pur autre vie holder who may transfer that interest to their heirs by will or through intestate succession.
19
Q
What is the future interest that follows a life estate?
A
A lifie estate is followed by a reversion (if the future interest is held by the grantor) or a remainder (if the future interest is held by a grantee)
20
Q
How do you transfer by deed?
A
A deed is transferred by a living person for real property. The transfer is a conveyance or grant and the transfer occurs between a grantor and a grantee.
21
Q
How do you transfer by will?
A
To transfer by will you devise. The person whose will contains the devise is the testator or the testatrix and the recipient is a devisee.
Typically a will occurs in writing, signed by testator and two witnesses who saw the testator sign the will, thereby attesting to the signature.
22
Q
How do you transfer by intestate succession?
A
If a person dies without a will, their property is distributed according to state statutes, usually the closes living relatives. To transfer you descend, the recipient is the heir.
23
Q
What is the common law doctrine of waste?
A
A life tenant must use their property in a manner that does not significantly injure the rights of the future interest holders.
24
Q
What are the three kinds of common law waste?
A
- Voluntary waste - voluntary act that significantly reduces the value of the property (demolishing a house)
- Permissive waste - failure to take reasonable care of the property (failing to make minor repairs or to pay property taxes)
- Ameliorative waste - affirmative action that changes the property and increases the value (putting in a pool)
25
What is the fee tail?
The duration of the fee tail is determined by the lives of the lineal descendants of a particular person.
26
What are the words of limitation for a fee tail?
O to A "and the heirs of his body"
The transferor retained a reversion if the lineage of the transferee runs out.
27
What is a term of years?
Common law rule - any transfer that includes a specified amount of time is treated as a term of years which is a nonfreehold estate that amounts to a lease
Statutory rule - a term of years that exceeds 99 years may qualify as a transfer of FSA
28
What is a fee simple defeasible?
A defeasible estate is one that may end on the occurrence of some future event or continue forever.
29
What are the three types of fee simple defeasibles?
- Fee simple determinable
- Fee simple subject to a condition subsequent
- Fee simple subject to an executive limitation
30
What is the fee simple determinable?
A fee simple interest that automatically ends when a certain event or condition occurs, giving the right of possession to the trasnferor.
31
What are the words used for a fee simple determinable?
FSDet uses words of duration:
So long as
While
Until
During
O to A "and his heirs" (FS) "so long as..."
A to B and his heirs so long as the property is used as a museum.
32
What is the future interest for a fee simple determinable?
The future interest for FSDet is always a possibility of reverter, only held by the transferor (or their heirs). It cannot be created in a transferee.
The reversion happens automatically when the condition is broken or the time period lapses.
33
How can a fee simple determinable be transferred?
FSDet is freely alienable, devisable, and descendible.
Duration and conditions continue to apply to any transferee.
34
What were the common law limits on the future interest of fee simple determinables?
At CL, the reversion that follows FSDets could not be devised or assigned, it could only pass via intestate succession.
Modern rules now allow the FSDet to be alienable, devisable, and descendible.
35
What is a fee simple subject to a condition subsequent?
An FSSCS is an FS estate created in a transferee that may be terminated at the election of the transferor when a certain condition or event occurs.
If the condition happens, the estate does not automatically end, but the transferor has a right of entry. If they do not enter and take possession, the estate continues.
36
What words are used to create an FSSCS?
FSSCS uses conditional words:
Provided that
But if
on the condition that
O to A provided that...
37
What is the future interest that always follows an FSSCS?
A right of entry always follows an FSSCS.
The right of entry can only be retained by the transferor (or his heirs), it cannot be created in a transferee.
38
How does a right of entry end the possessory estate after a condition has occurred?
The transferor can elect to re-enter the property, divesting the transferee of possession.
Traditionally, the transferor had to reenter the land and take back possession. Under modern rules, the right to terminate often occurs via notice to the transferee.
39
How can an FSSCS be transferred?
It is freely alienable, devisable, descendible, but any transferee is bound by the condition.
Under the CL, the right of entry could not be assigned or devised. Modern rules allow the right of interest to be alienable, devisable, and descendible in most jurisdictions.
40
If there is ambiguous language in a deed, how will it typically be read?
Typically, ambiguous language will be read to incorporate an FSSCS to avoid the strict enforcement and forfeiture of the FSD.
41
What is a fee simple subject to an executory limitation?
A FSSEL is a defeasible FS estate created in a transferee that is followed by a future interest in another transferee. The future interest is held by a third party.
42
What are the words used to create an FSSEL?
FSSEL uses words of duration and condition:
So long as, while, during, until, provided that, but if, on condition that
O to A and his heirs so long as... and then to...
43
What is the future interest that follows an FSSEL?
The future interest that follows an FSSEL is always an Executory Interest in a third party.
The third party will gain a possessory interest if the property is no longer used in the way specified.
44
How can an FSSEL or the FI of an FSSEL be transferred?
An FSSEL is freely alienable, devisable, and descendible. Any transferee is subject to the condition.
An executory interest is freely alienable, devisable, and descendible.
45
Does the doctrine of waste apply to an FSSEL?
Typically no.
46
What is a future interest?
An existing, nonpossessory property right that may become possessory in the future.
47
What are the two types of future interests?
FI's in the transferor
| FI's in the transferee
48
What are the FI's in the transferor?
FI's in the transferor are:
Reversion
Possibility of reverter
Right of entry
49
What are the FI's in the transferee?
FI's in the transferee:
```
Indefeasibly vested remainder
Vested remainder subject to divestment
Vested remainder subject to open
Contingent remainder
Executory interest
```
50
What occurs when an FI is retained by the transferor?
A transferor conveys an estate to a third party that is smaller than the estate the transferor holds.
51
What is a reversion?
An automatic return of FSA to the transferor after the possessory estate ends.
52
What is a possibility of reverter?
When a FI is retained by a transferor who holds FSA, but conveys an FSD, the FI is a possibility of reverter. It is uncertain, because the durational term might end or it might last forever.
If/when the conveyed estate ends, the estate reverts to the transferor as FSA.
53
What is a right of entry?
When an FI is retained by a transferor who holds FSA, but transfers a FSSCS, the FI is a right of entry.
Under a right of entry, the FI does not become possessory until the holder takes the affirmative steps to regain possession.
54
How can the FI's in transferors be transferred?
Reverter, possibility of reverter, and right of entry are all freely alienable, devisable, and descendible.
Under CL, Poss of Rev and Right of Entry were only conveyed through intestate succession, now they are typically free of restraint.
55
What are the future interests created in a transferee?
FI's in the transferee are:
1. Remainder
2. Executory interest
The purpose is to provide for the owner's family
56
What is a remainder?
A remainder is created when an FI is created in a transferee that is:
1. Capable of becoming possessory upon the expiration of the prior estate
AND
2. Does not divest any interest in a prior transferee
57
To be a remainder, does possession have to be guaranteed?
No, it can be guaranteed or possible.
(Guaranteed) O to A for life, then to B
(Possible) O to A for life, then to B if B becomes president.
58
What is required of a remainder because it does not divest?
A remainder "waits patiently" for the preceding estate to expire before it becomes possessory.
59
What are the different types of remainders?
Indefeasibly vested remainder
Vested remainder subject to divestment
Vested remainder subject to open
Contingent remainder
60
What does it mean for a remainder to be vested?
It must be:
1. Created in an ascertainable person
AND
2. Not subject to a condition precedent other than the natural termination of the prior estate
61
What is an indefeasibly vested remainder?
A remainder in an identifiable person that is CERTAIN to become a possessory estate
O to A for life, then to B -> B has an indefeasibly vested remainder because B will get possession no matter what.
62
What is an ascertainable person?
A person who is alive and identifiable at the time of transfer.
63
What kind of people are NOT ascertainable?
1. Unborn children
| 2. Heirs are not ascertainable even if they are living b/c heirs aren't identified until death
64
What is a vested remainder subject to divestment?
1. Created in an ascertainable person
2. Not subject to a condition precedent
3. Subject to a condition subsequent (it is possible the divestment could occur before the estate becomes possessory)
O to B for life, then to D, but if D does not survive B, then to E
D's interest is vested remainder subject to divestment because the interest becomes possessory UNLESS a specified event occurs (D dies before B does)
65
What is a condition precedent?
Something that must happen before the remainder can become possessory.
O to B for life, then to D *if D becomes president*
D's interest only becomes possessory IF D becomes president first.
66
What is a vested remainder subject to open?
1. Created in at least one ascertainable person
2. Not subject to a condition precedent
3. Shared remainder in a class that may be enlarged in the future
O to B for life, then to D's Children (D has two children, E and F) but may have more.
E and F have vested remainders subject to open because D may have more kids. The size of the interest will be split proportionally.
67
What is a contingent remainder?
A contingent remainder occurs when either:
1. It is given to an unascertainable person
OR
2. It is subject to a condition precedent
O to B for life, then to heirs of D (heirs are not ascertainable at the time of transfer)
O to B for life, then to D if D becomes president (D has to do something BEFORE the interest becomes possessory)
68
If the wording of a conveyance was ambiguous, what would judges read into a remainder?
Judges would read a vested remainder rather than a contingent remainder to maximize the marketability of the land.
69
What is an executory interest?
A future interest in a transferee that much divest another estate or interest to become possessory.
70
What are the types of executory interests?
Springing and shifting
71
What is a springing executory interest?
An executory interest that follows an interest in the transferor
O to B for life, then one year after B's death, to D and his heirs.
72
What is a shifting executory limitation?
An executory interest that follows an interest in a transferee.
O to B and his heirs until humans land on Mars, then to D and his heirs.
73
How can executory interests be transferred?
Freely alienable, devisable, and descendible.
74
How does the restatement view of future interests shift?
The Rsts abandon the traditional distinctions between future interests. All FIs are either a remainder (created in the transferee, an exec interest) or a reversion (retained by the transferor, right of entry or reverter).
75
What is favored in property law?
Free alienation. Contingent remainders and executory interests are uncertain, so doctrines were created to reduce the uncertainty.
76
What four doctrines did the common law develop to reduce uncertainty?
1. Rule in Shelley's Case
2. Doctrine of Worthier Title
3. Doctrine of Destructibility of Contingent Remainders
4. Rule against Perpetuities
77
What is the rule in Shelley's case?
If a freehold estate is given to a person and, in the same instrument, a remainder is given to their heirs (or the heirs of their body) of that person, he takes the freehold estate and the remainder.
78
What is an example of the Rule in Shelley's Case?
O to B for life, then to B's heirs -> using the RiSC, the contingent remainder in the heirs of B would change to a vested remainder in B.
79
What are the elements of the Rule in Shelley's Case?
1. One instrument
2. Creates a freehold estate in the transferee
3. And a remainder in the transferee's heirs
4. And both interests are legal or both equitable
This rule applied even if it was against the express wishes of the transferor. It only applies to the heirs of the tranferees. It is treated as a rule of law.
80
What is the rule of the doctrine of worthier title?
If a grantor creates a remainder or an executory interest in his own heirs, the grantor retains a future interest in himself rather than creating a future interest in those heirs.
81
What is an example of the Doctrine of Worthier title?
O to B for life, then to O's heirs
Since a buyer cannot contract with O's unascertainable heirs, the DoWT changes the contingent remainder of O's heirs to a reversion in O.
82
What is the rule of Doctrine of Destructibility of Contingent Remainders?
Any contingent remainder that has not vested at the termination of the preceding freehold estate is destroyed.
This was developed to decrease uncertainty by using a wait and see approach which allows the contingent remainders to be valid when they are created but if it has not vested be the end of the prior estate, the contingent remainder is destroyed.
83
What are the elements of the Doctrine of Destructibility of CRs?
1. A contingent remainder
| 2. That does not vest before the preceding freehold estate (typically a life estate) ends
84
What is an example of the Doctrine of Destructibility of CRs?
O to B for life, then to C if C becomes a lawyer.
For C's interest to vest, C must become a lawyer. If C does not become a lawyer before B dies, then the contingent remainder is destroyed.
85
What is the current view of the Doctrine of Destructibility of CRs?
Almost universally abolished. Under the modern approach, if a contingent remainder does not vest before the prior estate ends it becomes an executory interest.
86
According to the development of the Doctrine of Destructibility of CRs, what is the breakdown of title for the following:
O to G for life, then to M and her heirs if M marries?
1. Original rule = M has a contingent remainder in FS, O has a reversion
2. DoDoCR = If M is not married when O dies, the remainder is destroyed and O's reversion becomes possessory.
3. Modern rule = If M is not married when O dies, M's CR turns into a Springing Executory Interest and the property reverts to O in FSSEL.
87
What is the Rule Against Perpetuities?
No interest is good unless it must vest, if at all, no later than 21 years after some life in being at the creation of the interest.
88
What is the effect of the RAP?
A contingent interest is ONLY valid if you can logically prove that it will either vest or forever fail to vest within the perpetuities period (a life in being plus 21 years). If there is any possibility that the interest might vest more than 21 years from the death of the relevant lives in being, the future interest is void when created.
If you can imagine a set of facts under which the interest might vest too late, the interest is void.
89
How do you analyze a transfer under RAP?
1. ID the contingent interest
2. List the lives in being at the time of the transfer
3. Consider whether anyone can be born who might affect vesting (I.e. subject to open)
4. Kill off the lives in being at some future date and add 21 years.
5. Ask: is it possible the contingent interest will vest after this point?
90
What is the purpose of the RAP?
It is meant to ensure that the wealth of the world is controlled by the living and not the dead.
91
What is an example of the RAP?
O to C if anyone finds a cure for cancer
O has a possessory interest in FSSEL, C's interest will only vest if a cure is found. That could be well after O and C die so C's interest is invalid.
92
What are the three interests that are subject to the RAP?
1. Contingent remainders
2. Executory interests
3. Vested remainder subject to open
93
What are the issues to trip on with RAP?
1. Unborn widows
2. Slothful executor
3. Fertile Octogenarian
94
What is the unborn widows issue (RAP)?
O to B for life, then to B's widow for life, then to B's children living at B's widows death.
If B marries D (who was not alive at the time of conveyance and is therefore not a life in being), then B and D could have a child (E). If B and O die (the only lives in being) the clock starts, and if D lives for more than 21 years then E's interest would fail to vest before the time period is up.
95
How is life defined under the RAP?
Life begins at conception, so a person conceived at 20 years 364 days after the last life in being died would still count.
96
What is the slothful executor issue (RAP)?
O to B for life, then to C when B's will is probated.
Wills are typically probated within several months, but it is possible that probate may extend for more than 21 years after all relevant lives in being have died. Given the possibility of the time period lapsing, C's interest is void under RAP.
97
What is the fertile octogenarian issuee (RAP)?
O to my children for life, then to my grandchildren.
O is 80 years old and has two children (E and D) and no grandchildren. O could have another child (F) after conveyance. O, E, and D could die and F could outlive them by more than 21 years which would make it possible that the interest of O's grandchildren would not vest until after the time period has elapsed. O's grandchildren's interest is void under RAP.
98
What is the Wait and See approach to the RAP?
A modern reform that voids an interest that does not vest within a life in being plus 21 years, but only after that time period has elapsed. If the condition is met within the time period, the conveyance is valid. If not, it is invalid.
99
What is the Uniform Statutory Rule Against Perpetuities (USRAP)?
Modern reform that declares: an interest is valid if it satisfies the common law rule OR if it actually vests within 90 years after its creation.
100
O to B for life, then to M's first child reach 30.
How would this be assessed given both the Standard and the Wait and See approach to RAP?
O to B for life, then to M's first child reach 30.
Under standard RAP, the conveyance would be void because it is possible that O, B, and M die when M's child is 1 year old in which case it would fail to vest in time.
Under the wait and see approach, the conveyance can still be valid until the 21 years has elapsed at which point it will fail or vest accordingly.
101
What is Cy pres (RAP)?
The court rewrites the language of the conveyance so that the future interest no longer violates the common law rule in order to honor the transferor's presumed original intent.
O to B for life, then to M's first child who reaches 30 -> gets rewritten to O to B for life then to M's first child to reaches 21.
102
What is a savings clause?
A savings clause prevents any potential violation of the RAP by requiring that every interest vest before the end of the applicable perpetuities period.
"Any trust created will terminate if it has not previously terminated 21 years after the death of the last life in being"
103
Can corporations, partnerships, or government entities be used as lives in being?
No, because they have a potentially limitless existence.
104
Which three future interests are subject to RAP?
1. Contingent Remainders
2. Vested remainder subject to open
3. Most executory interests (those that are contingent)
105
Which three future interests are not subject to RAP?
1. Reversion
2. Possibility of reverter
3. Right of entry
