Rule against perpetuities and rule against restrains on alienation Flashcards
Rule against perpetuities generally
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
Applies only to
- contingent remainders
- executory interests
- vested remainders subject to open
- options to purchase, and
- rights of first refusal
Grantor’s interests are safe from the rule
When perpetuities period begins to run
The time the interest is created and the perpetuities period begins to run depends on the instrument and the interest created
Interests by will - runs from date of testator’s death
Deeds - date of delivery
Irrevocable trusts - date it is created
Revocable trust - date it becomes irrevocable
Step 1 of RAP
Determine the interests
Which future interests have been created by the conveyance and whether the rule could apply to that interest
- does not vest to grantors interests, indefeasibly vested remainders, or vested remainders subject to total divestment
Step 2 of RAP
How does the future interest holder take?
Determine what has to happen for the future interest holder to take
Step 3 of RAP
Measuring life
Look for the people alive at the date of the conveyance whose lives and/or deaths are relevant to what has to happen for the future interest holder to take
Step 4 of RAP
When will we know if the future interest holder can take?
Determine whether we’ll know for sure within 21 years of the death of a measuring life if the future interest holders can take
- if so, conveyance is good
- if won’t know for sure within 21 years, future interest is void
RAP - executory interest with no time limit
Bright line rule
An executory interest that follows a defeasible fee, with no limit on the time within which it must vest violates the rule against perpetuities and the executory interest is stricken
- “To A and his heirs so long as the land is used for farm purposes, and if the land ceases to be so used, to B and his heirs”
An executory interest following a defeasible fee is valid only if the condition is specific to the fee holder or expressly limited to the perpetuities period
Result if interest violates RAP
When a void interest is stricken, the interests are classified as if the void interests were never there
Reform of RAP generally
Lots of reform to the RAP
Wait and see / second look doctrine
USRAP
Cy Pres doctrine
Wait and see / second look doctrine - RAP
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 measuring life
Won’t hold it invalid until the person actually dies
Uniform Statutory Rule Against Perpetuities (USRAP)
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
Rule against restrain on alienation generally
Generally, any restriction on the transferability of a legal (rather than equitable) interest is void
Three types
- disabling - attempted transfers are ineffective
- forfeiture - attempted transfer forfeits the interest
- promissory - attenuated transfer breaches a covenant
Disabling restraint on any legal interest is void
Forfeiture and promissory may be valid, depending on the nature of the restraint and the interest involved
- restraints for a limited time and reasonable purpose may be upheld (like prohibiting co-tenant restraint so no one lives with stranger)
Discriminatory restraints on transfer
Prohibiting the transfer or use of property to or by a person of a specified racial, religious, or ethnic group is discriminatory state action forbidden by 14th amend
