Rule Against Perpetuities

Question 1

What is the RAP?

Answer 1

No interest is valid IF is could vest later than any life in being at the time of creation plus 21 years.

Question 2

When is an interest vested?

Answer 2

When there is no condition that has to be satisfied AND the exact identity of the taker is KNOWN.

Question 3

What is the NY perpetuities reform statute?

Answer 3

NY statute reduces ALL age contingencies to 21 years, thus saving a gift that would otherwise violate the RAP.

(e.g., Sonny conveyed Blackacre “to his daughter Cher for life, remainder to the first of Cher’s kids to reach 30.” MBE: Violates RAP because it could take longer than life in being (Cher) + 21 years; IN NY: No violation! The stipulation is automatically changed to “…first of Cher’s kids to reach 21.”

Question 4

What is the NY rule against suspension of the power of alienation?

Answer 4

Any interest is void if it suspends the power of alienation for a period longer than lives in being + 21 years.

(Sounds like RAP, but different: Even interests that are fully vested, so not a problem under RAP, could prevent alienation of the property for a long time – which is what the suspension of the power of alienation seeks to prevent)

(Suspension rule is often used in conjunction with RAP!)

Question 5

When is suspension of alienation a concern? (2 times)

Answer 5

When either:

1. Spendthrift income interests are in the trust; OR
2. A life estate is created in an unborn person, or in an open class that could include unborn persons.