Rule Against Perpetuities (RAP) Flashcards
what is the rule against perpetuities (RAP)?
the 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 (life in being)
to what kind of interests does the RAP apply?
contingent remainders
executory interest
vested remainders subject to open
options to purchase
rights of first refusal
NOT grantor’s interests and NOT other vested remainders
NOT charity-to-charity dispositions
NOT options to purchase held by a current tenant
when does the perpetuities period begin to run
interests granted by will: testator’s death
interests granted by deed: date of delivery
irrevocable trust: date created
revocable trust: date it becomes irrevocable
when does an interest vest for purposes of the RAP
when it becomes
(1) possessory
or
(2) becomes an indefeasibly vested remainder or a vested remainder subject to total divestment
consequences of violating RAP
strike the offending interest
four step technique for assessing potential rule against perptuities problems
(1) determine the interests –– make sure the future interest created is the type that the RAP applies to (contingent remainders, executory interests, certain vested remainders subject to open)
(2) how does future holder take? – is there a condition? does someone need to die? have children? etc.
(3) find the measuring life – look for person alive at date of conveyance whose life or death is relevant to the future interest vesting
(4) when will we know if the future interest holder can take? — ask if we will know for sure within 21 years of the death of a measuring life if the future interest holder can take. if the answer is yes, the conveyance is good. if no, the future interest is void
O to A for life, and if B becomes a veterinarian, to B.
A is alive, B is 9 years old.
does this violate the RAP?
No
A has a life estate; B has a contingent remainder. We will know when B dies whether B became a veterinarian.
common cases that violate RAP
(1) executory interests that follow defeasible fees with no time limit on when the executory interest must vest
Ex: To A for so long as no liquor is consumed on the premises, then to B. – violates RAP
Ex: 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. – violates RAP (A has a fee simple determinable subject to B’s shifting executory interest; for B to take, the land has to be ceased being used for farm purposes, the measuring life is A because A has the power to abide by the condition during her lifetime, but within 21 years after A dies, we will not know if B can take.
(2) A gift to an OPEN class conditioned on members surviving beyond age 21
Ex: To A for life, then to those of A’s children who attain the age of 25. A is alive and has one child, B, who is 30. (A has a life estate, A’s children have a vested remainder subject to open. BUT, it violates RAP. We will not know, within 21 years after A’s death, if A will have another child to reach age 25. A could die in labor, have a child, and within 21, years, that child may die before reaching age 25 or may only be 22 in 21 years.)
NOTE: if the interests of any class member may vest too remotely, the whole class gift fails. for the class gift to vest, the class must be closed and all conditions precedent must be satisfied for every member.
(3) fertile octogenarian — a woman is conclusively presumed to be capable of bearing children regardless of age or medical condition
(4) unborn widow or widower
Ex: O to A for life, then to A’s widow for life, then to A’s surviving issue in fee. – The gift to A’s ISSUE is invalid because A’s widow might be a spouse who was not in being when the interest was created (if the remainder was to A’s children it would be valid because it would vest on A’s death)
(5) administrative contingency (such as a gift conditioned on admission of a will to probate) violates RAP
Ex: A gift to my issue surviving at the distribution of my estate. – violates RAP because estate might be distributed beyond 21 years of life in being.
what is an option and right of first refusal (RFR)
OPTION – contract supported by consideration that creates in optionee a right to purchase the property on terms provided in the option
RIGHT OF FIRST REFUSAL — if a seller receives a third party’s offer to purchase the property, the right of first refusal gives the holder the right to purchase the property, usually on the same terms as that 3rd party offer
apply RAP to options and RFR
options or RFRs that are not personal to the holder (which are extended to holders heirs and assigns) will VIOLATE RAP because they might be exercised later than the end of the perpetuities period
EXCEPT:
RAP does not apply to options to purchase land held by the current lessee (but does apply to a former tenant and to any party to whom the current tenant might transfer the option separately from the lease)
modern trend with RFR and Options
the rule against restraints on alienation will be applied to options and RFR – meaning an option or RFR will be valid if it does not impose an unreasonable restraint on alienation
