BAR FLASHCARDS - PEFI 3

Question 1

Future Interests:

If a future interest is held by a transferor….

If a future interest is held by someone other than the transferor, it must be ….

Answer 1

A future interest gives its holder the right or possibility of future possession of an estate.
Despite the fact that possession is in the future, a future interest is a present, legally protected right in property.

There are six categories of future interests, and we classify them based on whether they are retained by the transferor/grantor or instead, by a transferee.

If a future interest is held by a transferor, it must be (1) a possibility of reverter; (2) a right of entry; or (3) a reversion.

If a future interest is held by someone other than the transferor, it must be
(1) a contingent remainder;
(2) a vested remainder (of which there are three types; or
(3) an executory interest (of which there are two types, discussed below).

Question 2

If a future interest is held by a transferor, it must be (3 types)

Answer 2

If a future interest is held by a transferor, it must be (1) a possibility of reverter; (2) a right of entry; or (3) a reversion.

Question 3

If a future interest is held by someone other than the transferor, it must be (3 types)

Answer 3

If a future interest is held by someone other than the transferor, it must be (1) a contingent remainder; (2) a vested remainder (of which there are three types, discussed below); or (3) an executory interest (of which there are two types, discussed below).

Question 4

Future interest in grantor (3 types), what does each accompany?

Answer 4

(1) Possibility of reverter
- Accompanies fee simple determinable

(2) Right of entry/power of termination
- Accompanies fee simple subject to condition subsequent.

(3) Reversion
- Accompanies when grantor conveys estate of lesser duration than what she started with (less than fee simple determinable) (other than above).
- Reversion examples:
– life estate. O has a reversion bc its less than fee simple estate.
– Term of years. “To A for 99 years”.
– Both.

Question 5

Future Interests In transFerOr—reVersIOnarY Interests. There are only three future interests capable of creation in the grantor:

Answer 5

Future Interests In transFerOr—reVersIOnarY Interests
There are only three future interests capable of creation in the grantor: the possibility of reverter, the right of entry, and the reversion.

Question 6

Possibilities of reverter

Answer 6

Possibilities of reverter: Accompanies FEE SIMPLE DETERMINABLE.
These interests were discussed in Module 2 in connection with defeasible fees. Remember that the possibility of reverter accompa- nies the fee simple determinable and the right of entry (also known as the power of termination) accompanies the fee simple subject to condition subsequent.

Question 7

rights of entry

Answer 7

Right of reentry accompanies FEE SIMPLE SUBJECT TO CONDITION SUBSEQUENT
the right of entry (also known as the power of termination) accompanies the fee simple subject to condition subsequent.

Question 8

Reversions

Answer 8

Reversions
A reversion is the estate left in a grantor who conveys less than they own (for example, O conveys “to A for life”; O has a reversion).
Whenever a grantor transfers an estate of lesser duration than what they started with–other than instances giving rise to a possibility of reverter or a right of entry–the future interest that arises is a reversion.
The reversion arises by operation of law; it does not have to be expressly reserved. A reversion is transferable, devisable by will, and inheritable. Its holder can sue for waste and for tortious damage to the reversionary interest.

Question 9

RAP: Reversionary interests

Answer 9

All reversionary interests are vested and, thus, not subject to the Rule Against Perpetuities (discussed later).

Question 10

Future Interests In transFerees OVerVIeW:

3 types…

Answer 10

If a future interest is held by someone other than the grantor, it has to be either:
• A contingent remainder, OR
• A vested remainder (of which there are three types): (1) the in- defeasibly vested remainder, (2) the vested remainder subject to complete defeasance (also known as the vested remainder subject to total divestment), and (3) the vested remainder subject to open, OR
• An executory interest (of which there are two types: (1) the shifting executory interest, and (2) the springing executory interest).

Question 11

A vested remainder: three types

Answer 11

• A vested remainder (of which there are three types):
(1) the in- defeasibly vested remainder,
(2) the vested remainder subject to complete defeasance (also known as the vested remainder subject to total divestment), and
(3) the vested remainder subject to open.

Question 12

executory interest: two types

Answer 12

• An executory interest (of which there are two types:
(1) the shifting executory interest, and
(2) the springing executory interest).

Question 13

Future interests in 3rd parties (transfeers): REMAINDERS

Answer 13

• Possession on natural expiration of preceding estate (life estate or term of years).

A remainder is a future interest in a third person that can become possessory on the natural expiration of the preceding estate.
It cannot divest a prior estate, and it cannot follow a time gap after the preceding estate.
A remainder must be expressly created in the instrument creating the preceding possessory estate.
Remainders are either vested or contingent.

O conveys “to A for life, then to B and his heirs.” B has a remain- der.

Question 14

Remainders follow…

Answer 14

Possession on natural expiration of preceding estate (life estate or term of years).
Life tenant or term of years.

Question 15

O conveys “to A for life, then to B and his heirs.”

Answer 15

A=life tenant.
B = remainderman. B has a remainder.

Question 16

O conveys “to A for life, then to B and his heirs one day after A’s death.”
What does B have?

Answer 16

B does not have a remainder (because there is a gap).

Question 17

To remember the remainder, think of it as:

Answer 17

To remember the remainder, think of it as:
• Sociable. Remainders never travel alone. In other words, remainders always accompany a preceding estate of known, fixed duration (such as a life estate or term of years).
• Patient and polite. A remainder never cuts short or divests the prior taker. Instead, it patiently waits its turn and won’t take until the present life estate or term of years comes to its conclusion. Because a remainder cannot “cut short” a preceding estate, it can never follow a fee simple estate, which is of potentially infinite duration. (Executory interests are the future interests that cut short preceding estates or follow a gap after them.)

Question 18

Remainder is EITHER:

Answer 18

CONTINGENT or VESTED

Question 19

Contingent remainder

Answer 19

Contingent: Taker as yet unascertainable or subject to condition precedent.
Contingent remainder: A remainder is contingent if:
(1) it’s created in unborn or unascertained persons, or
(2) it’s subject to a condition precedent, or both.
In other words, a remainder may be contingent as to person or as to event.

a. unborn or unascertained Persons: A remainder created in unborn or unascertained persons is contin- gent because until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends.

b. subject to Condition Precedent: A condition is precedent if it must be satisfied before the remaind- erman has a right to possession. Look for the condition to appear before the language creating the remainder or for it to be woven into the grant to the remainderman. Think of it as a prerequisite to the remainderman’s admission, that is, it’s something they must do in order to succeed in taking possession.

Question 20

Contingent remainder: Unborn or unascertained person

Answer 20

a. unborn or unascertained Persons: A remainder created in unborn or unascertained persons is contin- gent because until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends.

Question 21

O conveys “to A for life, then to B’s first child.” A is alive. B, as yet, has no children.

Answer 21

Contingent remainder - yet unborn first child of B. Contingent on B’s first child being born.

Question 22

O conveys “to A for life, then to B’s heirs.” A is alive. B is alive.

Answer 22

Because a living person has no heirs, while B is alive, his heirs are unknown. Thus, the remainder is contingent.

Question 23

O conveys “to A for life, then to those children of B who survive A.” A is alive, as is B.

Answer 23

But we don’t yet know which, if any, of B’s chil- dren will survive A. Thus, the remainder in B’s children is contingent.

Question 24

Contingent remainder: subject to Condition Precedent

Answer 24

b. subject to Condition Precedent
A condition is precedent if it must be satisfied before the remainderman has a right to possession.

Look for the condition to appear before the language creating the remainder or for it to be woven into the grant to the remainderman.

Think of it as a prerequisite to the remainderman’s admission, that is, it’s something they must do in order to succeed in taking possession.

Question 25

“To A for life, then, if B graduates from college, to B.” A is alive. B is now in high school.

Answer 25

B graduating from college is the CONDITION PRECEDENT. Before B can take, he must graduate from college. He has not yet satisfied this condition precedent. B has a contingent remainder subject to condition precedent. O has a reversion. What if B graduates from college during A’s lifetime? Indefeasibly vested remainder.

Question 26

1) O conveys “to A for life, then to B and his heirs if B marries C.”

Answer 26

B’s remainder is contingent because he must marry C before he can take possession.

Question 27

2) O conveys “to A for life, then to B and his heirs if B marries C, otherwise to D and his heirs.”

Answer 27

B and D have alternative contingent remainders.

Question 28

O conveys “to A for life, then to B and his heirs; but if B marries C, then to D and his heirs.”

Answer 28

B has a vested remainder (because there’s no condition precedent) subject to divestment by D’s executory interest.

Question 29

Common law doctrines on remainders

Answer 29

ABOLISHED (wrong answer choice) Destructibility of Contingent remainders: At common law, a contingent remainder was destroyed if it failed to vest before or upon the termination of the preceding freehold estate. Rule in shelley’s Case (rule against remainders in Grantee’s Heirs): At common law, if the same instrument created a life estate in A and gave the remainder only to A’s heirs, the remainder was not recognized, and A took the life estate and the remainder. Doctrine of Worthier title (rule against remainders in Grantor’s Heirs): Under the Doctrine of Worthier Title (“DOWT”), a remainder in the grantor’s heirs is invalid and becomes a reversion in the grantor.

Question 30

If your future interest is created in someone other than the grantor, it is EITHER:

Answer 30

A contingent remainder, or a vested reemainder, or an executory interest.

Question 31

Vested remainders

Answer 31

A vested remainder is one created in an existing and ascertained person, and not subject to a condition precedent. There are three types of vested remainders: (1) the indefeasibly vested remainder; (2) the vested remainder subject to total divestment (also known as the vested remainder subject to complete defeasance); and (3) the vested remainder subject to open.

Question 32

Three types of vested remainders:

Answer 32

There are three types of vested remainders: (1) the indefeasibly vested remainder: Subject to no conditions and no strings attached. (2) the vested remainder subject to total divestment (also known as the vested remainder subject to complete defeasance); and (3) the vested remainder subject to open.

Question 33

Indefeasibly Vested remainder

Answer 33

Indefeasibly Vested remainder: CERTAIN to acquire, NO STRING. An indefeasibly vested remainder is a vested remainder that is not subject to divestment or diminution. The holder of this remainder is certain to acquire an estate in the future, with no strings or conditions attached.

Question 34

“To A for life, remainder to B.” A is alive. B is alive.

Answer 34

“To A for life, remainder to B.” A is alive. B is alive. A has a life estate. B has an indefeasibly vested remainder. Because B exists and is following the life estate with no strings attached. What if B predeceases A? B's future interest passes by will or intestacy.

Question 35

Vested remainder subject to total divestment/subject to complete defeasement

Answer 35

This is a vested remainder that is subject to a condition subsequent. AKA vested remainder subject to complete defeasance. Here, the remainderman exists. His taking is not subject to any condition precedent. However, his right to possession could be cut short because of a condition subsequent. If condition subsequent happens, he is subject to forfeiture.

Question 36

Defeasement/divestment means

Answer 36

Forfeiture

Question 37

O conveys “to A for life, then to B and his heirs; but if B dies unmarried, then to C and his heirs.” B is alive and unmarried.

Answer 37

O conveys “to A for life, then to B and his heirs; but if B dies unmarried, then to C and his heirs.” B is alive and unmarried. ANSWER: B has a vested remainder subject to total divestment by C’s executory interest.

Question 38

distinguishing Conditions subsequent and Precedent

Answer 38

It’s important to know the difference between a condition precedent, which creates a contingent remainder, and a condition subsequent, which creates a vested remainder subject to total divestment. To tell the difference, apply the Comma Rule. When conditional language in a transfer follows language that, taken alone and set off by commas, would create a vested remainder, the condition is a condition subsequent, and you have a vested remainder subject to complete defeasance.

Question 39

Condition precedent, which creates a...

Answer 39

condition precedent, which creates a contingent remainder, and a condition subsequent, which creates a vested remainder subject to total divestment

Question 40

Condition subsequent, which creates a....

Answer 40

condition precedent, which creates a contingent remainder, and a condition subsequent, which creates a vested remainder subject to total divestment

Question 41

O conveys: “To A for life, then to B, provided, however, that if B dies under the age of 25, to C.” A is alive. B is 20 years old. What does A have? What does B have? What does C have? Read the example again. “To A for life, then to B, provided however that if B dies under the age of 25, to C.” A is alive and B is 20. What result if B is under age 25 at the time of A’s death? Note, however, that B must live to 25 for his estate to retain his interest. Otherwise, B’s heirs lose it all, and C or C’s heirs take.

Answer 41

O conveys: “To A for life, then to B, provided, however, that if B dies under the age of 25, to C.” A is alive. B is 20 years old. ["then to B" is example of language that, taken alone and set off by commas, would create a vested remainder... so any language that comes after that is a condition subsequent, and you have a vested remainder subject to complete defeasance.] What does A have? Life estate. What does B have? Vested remainder subject to complete defeasance. What does C have? A shifting executory interest. Read the example again. “To A for life, then to B, provided however that if B dies under the age of 25, to C.” A is alive and B is 20. What result if B is under age 25 at the time of A’s death? Note, however, that B must live to 25 for his estate to retain his interest. Otherwise, B’s heirs lose it all, and C or C’s heirs take.

Question 42

“To A for life, then to B, provided however that if B dies under the age of 25, to C.” A is alive and B is 20. What result if B is under age 25 at the time of A’s death?

Answer 42

B still takes. the AGE requirement is NOT a PREREQUISITE to B's ability to take. B has a vested remainder subject to complete defeasance.

Question 43

Where language is ambiguous, the preference is for....

Answer 43

Where language is ambiguous, the preference is for vested remainders subject to divestment rather than contingent remainders or executory interests.

Question 44

Again, what are the kinds of remainders...

Answer 44

Possession on natural expiration of preceding estate - CONTINGENT remainders: Taken as yet unascertainable or subject to condition precedent. - VESTED remainders: -- Indefeasibly vested: Certain to acquire, no strings attached. -- Vested Subject to complete defeasance: Subject to condition SUBSEQUENT. -- Vested subject to open: Class of takers, at least one already qualified to take.

Question 45

Vested remainder subject to Open

Answer 45

Vested subject to open: Class of takers, at least one already qualified to take, but each group members share is subject to diminution bc class could get larger. This is a vested remainder created in a class of persons (for example, “children”) that is certain to become possessory, but is subject to diminution—for example, by the birth of additional persons who will share in the remainder as a class. In other words, we have a group of persons, at least one of whom is qualified to take possession, but each group member’s share could get smaller because additional takers, not yet ascertained, may still join the class.

Question 46

“To A for life, then to B’s children.” A is alive. B has two children, C and D. What do C and D have? Why?

Answer 46

“To A for life, then to B’s children.” A is alive. B has two children, C and D. What do C and D have? C & D have a vested remainder, but they are part of a group of takers that is STILL OPEN. They have VESTED REMAINDERS SUBJECT TO OPEN.

Question 47

CLass GIFts

Answer 47

A “class” is a group of persons having a common characteristic (for example, children, nephews). The share of each member is determined by the number of persons in the class. A class gift of a remainder may be vested subject to open (where at least one group member exists) or contingent (where all group members are unascertained).

Question 48

A class gift of a remainder may be.... (2)

Answer 48

A class gift of a remainder may be vested subject to open (where at least one group member exists) or contingent (where all group members are unascertained).

Question 49

When the Class Closes—the rule of Convenience

Answer 49

A class is open when it’s still possible for others to join in. A class is closed when no others can join in. To figure out whether a given class has closed, we apply the rule of convenience. Under the rule of convenience, in the absence of express contrary intent, a class closes (that is, no one born after that time may share in the gift) when some member of the class can call for distribution of their share of the class gift. So, a class closes when any member of the class can demand possession.

Question 50

Rule of convenience

Answer 50

When any member can demand possession. This is when a class closes.

Question 51

a class closes when...

Answer 51

a class closes when any member can demand possession.

Question 52

To A for life, then to B’s children.” A is alive. B has two children, C and D. When does the class close? Why? Once A dies, a child of B born or conceived thereafter will not share in the gift. Our one exception is the womb rule. Under this rule, persons in gestation at the time the class closes are included in the class. Thus, a child of B in the womb at A’s death will share with C and D. What if C or D predeceases A?

Answer 52

To A for life, then to B’s children.” A is alive. B has two children, C and D. When does the class close? at B's death, AND, under the rule of conveince, at A's death. Why? BC that is when C & D can demand possession (rule of convenience). Once A dies, a child of B born or conceived thereafter will not share in the gift. Our one exception is the womb rule. Under this rule, persons in gestation at the time the class closes are included in the class. Thus, a child of B in the womb at A’s death will share with C and D. What if C or D predeceases A? their share goes to their devisees or their heirs.

Question 53

Womb rule.

Answer 53

Our one exception is the womb rule. Under this rule, persons in gestation at the time the class closes are included in the class.

Question 54

1) T’s will devises property to W for life, then to A’s children. At the time the will is executed, A has two children, B and C. A then has another child, D. T dies. A has child E, then W dies. After W’s death, A has another child, F.

Answer 54

1) T’s will devises property to W for life, then to A’s children. At the time the will is executed, A has two children, B and C. A then has another child, D. T dies. A has child E, then W dies. After W’s death, A has another child, F. The class closed at W’s death because it was time to make the distribution. Thus, B, C, D, and E share the proper- ty, and F is excluded.

Question 55

2) T’s will devises the residue of his estate “to those of A’s children who attain age 21.”

Answer 55

2) T’s will devises the residue of his estate “to those of A’s children who attain age 21.” If any of A’s children is 21 at T’s death, the class closes at that time. Otherwise it closes when one of A’s children reaches age 21. But remember, if it had been a future gift (that is, “to A for life, then to such of A’s children who attain age 21”), the class would remain open until the life tenant’s death even if some of the class members had reached the stated age at T’s death.

Question 56

survival

Answer 56

Survival of a class member to the time of closing is usually unnecessary to share in a future gift—unless survival was made an express condition (for example, “to A for life and then to her surviving children”). However, certain terms are construed to create implied survivorship conditions (for example, widow, issue, heirs, next of kin). Note that under some anti-lapse statutes, a gift will be saved for the party’s descendants even if there’s an express survival contin- gency (discussed further in the Multistate Real Property materials (“Conveyance by Gift and Will”)).

Question 57

when the instrument creating a gift of a future interest in an open class becomes effective, existing class members have what?

Answer 57

Generally, when the instrument creating a gift of a future interest in an open class becomes effective, existing class members have a vested remainder subject to open. But watch for a condition precedent, which will prevent the remainder from vesting. For example, “to A for life, remainder to those of B’s children who survive A” creates a contingent remainder in B’s children even if they are in existence—and even if B is dead—because the remainder is contingent on B’s children surviving A.

Question 58

Future interests in transferees RECAP: Name the 6 future interests, alienability of each, and whether each is subject to RAP?

Answer 58

Future Interests: Example: Alienability: Subject to Rule Against Perpetuities?:

Question 59

Future Interests: Indefeasibly Vested Remainder Example: Alienability: Subject to Rule Against Perpetuities?:

Answer 59

Indefeasibly Vested Remainder “To A for life, then to B.” Transferable, descendible, and devisable No

Question 60

Future Interests: Vested Remainder Subject to Total Divestment Example: Alienability: Subject to Rule Against Perpetuities?:

Answer 60

Vested Remainder Subject to Total Divestment “To A for life, and on A’s death, to B; but if B predeceases A, then to C.” (B has a vested remainder subject to total divestment.) Transferable, descendible, and devisable No

Question 61

Future Interests: Vested Remainder Subject to Open Example: Alienability: Subject to Rule Against Perpetuities?:

Answer 61

Vested Remainder Subject to Open “To A for life, then to A’s children in equal shares.” Transferable, descendible, and devisable Yes—as long as the class remains open

Question 62

Future Interests: Contingent Remainder Example: Alienability: Subject to Rule Against Perpetuities?:

Answer 62

Contingent Remainder “To A for life, then to B if B marries C.” OR “To A for life, then to A’s surviving children.” Transferable in most states (not at common law), descendible, and devisable Yes

Question 63

Future Interests: Shifting Executory Interest Example: Alienability: Subject to Rule Against Perpetuities?:

Answer 63

Shifting Executory Interest “To A for life, remainder to B and her heirs; but if B predeceases A, then to C and his heirs.” (C has a shifting executory interest.) Transferable in most states (not at common law), descendible, and devisable Yes

Question 64

Future Interests: Springing Executory Interest Example: Alienability: Subject to Rule Against Perpetuities?:

Answer 64

Springing Executory Interest “To A when and if he becomes a doctor.” OR “To A for life, then two years after A’s death, to B.” Transferable in most states (not at common law), descendible, and devisable Yes

Question 65

“To A for life, then to B.”

Answer 65

B has an indefeasibly vested remainder

Question 66

“To A for life, and on A’s death, to B; but if B predeceases A, then to C.”

Answer 66

(B has a vested remainder subject to total divestment.)

Question 67

“To A for life, then to A’s children in equal shares.”

Answer 67

A's children have a vested remainder subject to open.

Question 68

“To A for life, then to B if B marries C.”

Answer 68

B has a contingent remainder

Question 69

“To A for life, then to A’s surviving children.”

Answer 69

A's children have a contingent remainder bc they're unascertained

Question 70

“To A for life, remainder to B and her heirs; but if B predeceases A, then to C and his heirs.”

Answer 70

(C has a shifting executory interest.)

Question 71

“To A when and if he becomes a doctor.”

Answer 71

A has a springing executory interest

Question 72

“To A for life, then two years after A’s death, to B.”

Answer 72

B has a springing executory interest

Question 73

Executory interests

Answer 73

Cut short prior taker. Shifting: Follows defeasible fee, cut short someone other than grantor. Springing: follow a gap in possession or cut short a grantor’s estate (“springing interests”).

Question 74

Future Interests In transFerees—eXeCutOrY Interests

Answer 74

Executory interests are future interests in third parties that either divest a transferee’s preceding freehold estate (“shifting interests”), or follow a gap in possession or cut short a grantor’s estate (“springing interests”). While both remainders and executory interests are created in transferees, you can distinguish executory interests by remembering they must take effect by cutting short some interest – either in another person (shifting) or in the grantor or the grantor’s heirs (springing).

Question 75

Shifting executory interests

Answer 75

Shifting: Follows defeasible fee, cut short someone other than grantor. Think of SHIFTing - SHIVing, because it CUTS short SOMEONE other than the grantor. A shifting executory interest always follows a defeasible fee and cuts short someone other than the grantor.

Question 76

Springing executory Interest

Answer 76

-Cuts short grantor. Springing: follow a gap in possession or cut short a grantor’s estate (“springing interests”). springing executory Interest: A springing executory interest cuts short the interest of O, the grantor.

Question 77

“To A, but if B returns from Canada, to B and his heirs.”

Answer 77

A has a fee simple subject to B's executory interest. B has an executory interest. A shifting executory interest.

Question 78

O conveys: “To A, if and when she becomes a lawyer.” A is in high school. What does A have? Why? What does O have?

Answer 78

A has a springing executory interest, bc if she becomes a L she DIVESTS O's time with the land. O has a fee simple subject to A's springing executory interest.

Question 79

1) In a grant from O “to A and his heirs when A marries B” (A has not yet married B)...

Answer 79

1) In a grant from O “to A and his heirs when A marries B” (A has not yet married B), A has a springing executory interest because if and when she marries B she will divest O, the grantor.

Question 80

2) In a grant from O “to A for life, then to B and his heirs; but if B pre- deceases A, then to C and his heirs” (A is alive; B is alive)....

Answer 80

2) In a grant from O “to A for life, then to B and his heirs; but if B pre- deceases A, then to C and his heirs” (A is alive; B is alive), C has a shifting executory interest because if B predeceases A, C will take, thereby divesting B’s estate of B’s interest.

Question 81

TtransFeraBILItY OF reMaInders and eXeCutOrY Interests

Answer 81

Vested remainders are fully transferable, descendible by intestacy, and devisable by will. At common law, contingent remainders and executory interests were not transferable inter vivos, but most courts today hold that they are freely transferable. Contingent remainders and executory interests are descendible and devisable, provided survival is not a condition to the interest’s taking.

Question 82

Any future interest that is transferable is subject to....

Answer 82

Any future interest that is transferable is subject to invol- untary transfer; that is, it is reachable by creditors.