Week 3 - Future Interests

Question 1

Future Interest

Answer 1

existing, nonpossessory property right that may become possessory in the future

Question 2

Rights of holder of future interest

Answer 2

 Sell or transfer future interest (alienable, devisable, descendable)

 Use future interest as security for a loan

 Prevent current possessor from committing waste

 Be entitled to payment if property is taken by condemnation

Question 3

Future interests that transferor may hold

Answer 3

o Reverter
– e.g., If O holds fee simple absolute and conveys to B for life, O holds reverter
—reverter in this case = when life estate ends, property reverts to O
– e.g., “O conveys to G for 75 years”

o Possibility of reverter
– If O holds fee simple absolute and conveys fee simple determinable, O holds possibility of reverter
— E.g., “O conveys to G and her heirs so long as alcohol is not sold on the land”

o Right of entry
– If O holds fee simple absolute but conveys a fee simple subject to a condition subsequent
— E.g,. “O conveys to G and her heirs, but if alcohol is ever sold on the land, then O shall have the right to re-enter and retake the estate”

Question 4

Future interest that a transferee may hold

Answer 4

– executory interest
– remainder

Question 5

Remainder

Answer 5

A future interest in a transferee that:
(1) is capable of becoming possessory immediately upon the expiration of the prior estate, and
(2) does not divest (or cut short) any interest in a prior transferee

– e.g., “to B for life, but if D becomes president then to D” is not a remainder because it can impinge on length of time of prior estate)

– NOTE: remainders convey the POSSIBILITY of possession

Question 6

Four types of remainders

Answer 6

(1) Indefeasibly vested remainder

(2) vested remainder subject to a divestment

(3) vested remainder subject to open

(4) contingent remainder

NOTE: Historically, only vested remainders were freely transferable. Now, both vested and contingent remainders are alienable, devisable, and defeasible

Question 7

Indefeasibly vested remainder

Answer 7

– 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
—E.g., “O conveys to A for life, then to B”
—Ascertainable person = alive and identifiable
—-Unborn children are not ascertainable
—-A person’s heirs cannot be ascertainable until their death
—Condition precedent = condition that must be met before the remainder can become possessory other than the natural termination of the prior estate

Question 8

Vested remainder subject to divestment

Answer 8

A remainder that is vested, but is subject to a condition subsequent
– e.g., “O conveys to B for life, then to D, but if D does not survive B, then to E”

Question 9

Vested remainder subject to open (or vested remainder subject to partial divestment)

Answer 9

A vested remainder held by one or more living members of a group or class that may be enlarged in the future

– E.g., “O conveys to B for life, then to D’s children.” If E and F are D’s current children (both vested because both ascertainable and there is no condition precedent), but may have to share E and F may have to share property with later-born children of D, who are not presently ascertainable

Question 10

Contingent Remainder

Answer 10

A remainder that is not vested is contingent
– Either given to an unascertainable person or subject to a condition precedent
– NOTE: grantor often retains reverter (e.g., “O conveys to D for life, then to M if M is married” means that if M does not marry, property reverts to O)

Question 11

Term of Years

Answer 11

Estate conveyed for defined length of time (e.g., “O conveys to G for ten years”)

Question 12

Executory Interest

Answer 12

Exact opposite of remainder

Springing executor interest follows interest in transferor

Shifting executory interest follows interest in transferee

NOTE: no substantive legal difference between springing and shifting executory interests

E.g., “O conveys to B for life, then one year after B’s death, to D and his heirs.” In this hypothetical, Once B’s life ends, O regains a fee simple that has a duration of one year. D has a springing executory interest, not a remainder

A future interest in a transferee following a defeasible fee simple can only be an executory interest
– E.g., “O conveys to B and his heirs until humans land on Mars, and then to D and his heirs.”
— B has fee simple subject to an executory limitation
— D has a shifting executory interest

Executory interests are alienable, devisable, and descendible

Question 13

Future interests in Restatement of Property

Answer 13

Future interests are either remainder (created in a transferee) or reversion (retained by transferor)
– Executory interest = remainder
– Right of entry and possibility of reverter are classified as reversions

Question 14

Future Interest for fee simple determinable

Answer 14

future interest retained by transferor: possibility of reverter

Question 15

Future Interest for fee simple subject to a condition subsequent

Answer 15

future interest retained by transferor: right of entry

Question 16

Future interest for fee simple subject to an executory limitation

Answer 16

future interest created in transferee:
executory interest

Question 17

Future interest for fee tail

Answer 17

future interest retained by transferor: reversion

Question 18

Future interest for life estate and term of years

Answer 18

future interest retained by transferor : reversion

future interest created in transferee: remainder/executory interest

Question 19

Four doctrines limiting executory interests and contingent remainders

Answer 19

Rule in Shelley’s Case

Doctrine of Worthier Title

Doctrine of Destructibility

Rule Against Perpetuities

Question 20

Rule in Shelley’s Case

Answer 20

If a freehold estate is given to a person and, in the same instrument , a remainder is given to the heirs (or the heirs of the body) of that person, he takes both the freehold estate and the remainder
–e.g., “O conveys a life estate to B, then to B’s heirs” creates fee simple absolute for B

Four requirements
– One instrument
– Creates a freehold estate in a transferee
– Creates a remainder in that transferee’s heirs, and
– Both interests are legal or both equitable

No longer applicable in most jurisdictions

Question 21

Doctrine of Worthier Title

Answer 21

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 for those heirs
– E.g., “O conveys to B for life, then to O’s heirs” becomes “O conveys to B for life, then to O and his heirs”

Merely applied as a rule of construction in the few states that still follow this rule

Question 22

Doctrine of Destructibility of Contingent Remainders

Answer 22

A contingent remainder is valid when created, but if it has not vested by the time the prior estate ends, the contingent remainder is destroyed

E.g., “O conveys to B for life, then to C if C becomes a lawyer.” In this case, C’s contingent remainder is destroyed upon B’s death, and O’s reversion becomes possessory

Abolished in every jurisdiction (modern approach converts contingent remainder to executory interest if it does not vest before prior estate ends)

Question 23

Rule Against Perpetuities

Answer 23

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

– Perpetuities period is measured by adding 21 years to the date of death of the last individual who was alive when the interest was created.
— If you can conceive of just one situation where the interest vests outside of the perpetuities period, then the interest is void

– E.g., “O conveys to C if anyone finds a cure for cancer” is void when created because there is no certainty that C’s interest will vest or fail to vest within 21 years of the last life in being to die (O or C). However, “O conveys to C if C finds a cure for cancer” is valid because there are only two possibilities when C dies (they cured cancer or did not cure cancer).

– Only three interests are subject to the rule against perpetuities:
* Contingent remainders
* Executory interests
* Vested remainders subject to open

Question 24

Rule of Convenience

Answer 24

Modification to Rule Against Perpetuities: a limitation is not void based on possibility that class could change after 21 year period

a class (e.g., ‘all of Jee’s daughters’) closes when the prior estate ends and identified class members are entitled to possession

Question 25

Wait and See

Answer 25

some jurisdictions assess validity of interest by events that actually happen (e.g., if a class is closed during 21 year period allowed by Rule Against Perpetuities

Question 26

Uniform Statutory Rule Against Perpetuities (USRAP)

Answer 26

some jurisdictions assess interest as valid if it vests within 90 years of its creation

Question 27

Cy Press

Answer 27

some jurisdictions rewrite language of conveyance to not violate common law rule for the purpose of honoring the transferor’s presumed original intent

Question 28

Modern legislative trends in transferee future interest legislation

Answer 28

States have increasingly adopted legislation that allows perpetual trust (undoing Rule Against Perpetuities)

Question 29

Savings Clause

Answer 29

avoids violation of Rule Against Perpetuities, requires all interests to vest within applicable period