2. Future Interests

Question 1

What is a ‘future interest’?

Answer 1

A kind of estate that exists at the time it is conveyed, without possessory interest until a future event occurs.

Question 2

What are the three types of future interests for a grantor?

Answer 2

• Reversion
• Possibility of Reverter
• Powers of Termination

Question 3

What is a Grantor’s Reversionary Interest?

Answer 3

A future interest retained by the grantor when transferring less than a fee interest to a third person.

Question 4

Is a reversion transferable, deviseable, and descendible?

Answer 4

Yes.

Question 5

Is a reversion subject to the Rule Against Perpetuities?

Answer 5

No.

Question 6

What is a Grantor’s Possibility of Reverter?

Answer 6

The grantor’s future interest that triggers automatic land reversion after a determinable estate event.

Question 7

How is a Grantor’s Possibility of Reverter created?

Answer 7

A fee simple determinable automatically creates a possibility of reverter.

Question 8

Is a Grantor’s Possibility of Reverter transferable, devisable, and descendible?

Answer 8

Yes.

Question 9

Is a Grantor’s Possibility of Reverter subject to the Rule Against Perpetuities?

Answer 9

No.

Question 10

What is a Grantor’s Power of Termination?

Answer 10

A future interest in the grantor when attempting to create an FSSCS or a defeasible life estate.

Question 11

How is a Grantor’s Power of Termination created?

Answer 11

It must be expressly stated in the conveyance.

Question 12

Is the Power of Termination descendible and devisable?

Answer 12

Yes.

Question 13

Is the Power of Termination transferable inter vivos?

Answer 13

No.

Question 14

What happens when the language in a grant is unclear to create a Grantor’s Power of Termination?

Answer 14

Courts generally treat a provision in a deed as a covenant and not a condition subsequent.

Question 15

Is the Power of Termination subject to the Rule Against Perpetuities?

Answer 15

No.

Question 16

What are the two types of future interests for a grantee?

Answer 16

• Remainder
• Executory

Question 17

What is a Remainder?

Answer 17

A future interest in a grantee that follows the natural end of the preceding estate.

Question 18

What are the two types of remainders?

Answer 18

• Contingent remainders
• Vested remainders

Question 19

What is a Contingent Remainder?

Answer 19

A remainder that is contingent if:

1. the taker’s status is uncertain in the present time; or
2. subject to a condition precedent, not automatically vested upon the previous estate’s natural end.

Question 20

Is a Contingent Remainder transferable, descendible, and devisable?

Answer 20

Yes, when the person is ascertainable.

Question 21

Is a Contingent Remainder subject to the Rule Against Perpetuities?

Answer 21

Yes.

Question 22

What are the three ways that a Contingent Remainder can be destroyed?

Answer 22

• Fails to vest by the natural termination of the prior vested estate
• The doctrine of merger
• Holder of the present possessory estate surrenders his interest before the contingent remainder vests

Question 23

What is the doctrine of merger for a contingent remainder?

Answer 23

Occurs when a party with a present or future interest acquires all outstanding present and vested estates in the subject property.

Question 24

What are three situations where the doctrine of merger for a contingent remainder can occur?

Answer 24

• Surrender of the present estate to the owner of a future estate
• Release of a future estate to the owner of a present estate
• All holders of present and future vested interests convey their interests to a third party

Question 25

What is a Vested Remainder?

Answer 25

A remainder that requires ascertainable takers at its creation and automatic vesting without conditions precedent upon the prior

Question 26

Is a Vested Remainder transferable, descendible, and devisable?

Answer 26

Yes.

Question 27

What are the two types of Vested Remainders?

Answer 27

* Vested Remainder Subject to Open * Vested Remainder Subject to Total Divestment

Question 28

What is a Vested Remainder Subject to Open?

Answer 28

A remainder vested subject to open if the conveyance grants a remainder to a class of grantees with at least one member holding a vested remainder initially.

Question 29

Is a Vested Remainder subject to open subject to the Rule Against Perpetuities?

Answer 29

Yes.

Question 30

What is a Vested Remainder Subject to Total Divestment?

Answer 30

A remainder that is presently vested but may be terminated on the happening of a future event.

Question 31

What is an Executory Interest?

Answer 31

A future interest in a third person that cuts short the previous estate before it would have naturally terminated.

Question 32

Is an Executory Interest transferable, descendible, and devisable?

Answer 32

Yes.

Question 33

Is an Executory Interest subject to the Rule Against Perpetuities?

Answer 33

Yes.

Question 34

What are the two types of Executory Interests?

Answer 34

* Shifting Executory Interest * Springing Executory Interest

Question 35

What is a Shifting Executory Interest?

Answer 35

An interest that cuts short a prior estate created by the same conveyance. The interest passes from one grantee to another.

Question 36

What is a Springing Executory Interest?

Answer 36

An interest that follows a gap in possession or divests the estate of the transferor. The interest passes from a grantor to a grantee.

Question 37

What is a Class Opening?

Answer 37

The point in time when a gift or bequest from an estate is distributed or made available to the beneficiaries.

Question 38

What happens when a class is already closed at the time the gift takes effect?

Answer 38

All members of the class at that moment will take.

Question 39

What happens when any members of the class are later conceived or born after the gift takes effect?

Answer 39

They will not share in the estate.

Question 40

What is the Rule Against Perpetuities?

Answer 40

An interest must vest within 21 years of the creation of the interest based on a life-in-being.

Question 41

What are the six types of future interest that apply to the Rule Against Perpetuities?

Answer 41

* Option to purchase connected with a fee * Executory interests * Contingent remainders * Powers of appointment * Class gifts * Right of first refusal

Question 42

What is a Restraint on Alienation?

Answer 42

A condition placed on the ownership of real property that restricts the free conveyance of that property.

Question 43

What are the three types of Restraints on Alienation?

Answer 43

* Disabling Restraint * Forfeiture Restraint * Promissory Restraint

Question 44

What is a Disabling Restraint?

Answer 44

A restraint where a grantee may not convey; always void.

Question 45

What is a Forfeiture Restraint?

Answer 45

A restraint where the grantee loses his estate if he attempts to convey.

Question 46

When are Forfeiture Restraints valid?

Answer 46

For life estates and future interests, but not enforceable for fee simple estates.

Question 47

What is a Promissory Restraint?

Answer 47

A restraint where the grantee promises not to convey.

Question 48

What happens when a Promissory Restraint is breached?

Answer 48

It does not void the conveyance; it makes the promisor liable for breach of contract damages.

Question 49

What is a general power of appointment?

Answer 49

Gives the holder the right to appoint the property to anyone, including themselves.

Question 50

How is a general power of appointment valid under the Rule Against Perpetuities?

Answer 50

It must be exercisable, but not necessarily exercised, during the period allowed by the Rule.

Question 51

What is a special power of appointment?

Answer 51

Gives the holder the right to appoint the property to a limited class of persons.