Chapter 4 - Future Interests

Question 1

Future Interests Recognized in our legal system are:

Answer 1

(1) Interests retained by the transferor, known as:
(a) Reversion
(b) Possibility of reverter
(c) Right of entry (also known as power of termination)

(2) Interests created in a transferee, known as:
(a) Vested remainder
(b) Contingent remainder
(c) Executory interest

Question 2

Who does a future interest give legal rights to?

Answer 2

Its owner

Question 3

What is a Reversion?

Answer 3

The interest left in an owner when he carves out of his estate a lesser estate and does not provide who is to take the property when the lesser estate expires.

Alternate Definition:
The interest remaining in the grantor, or in the successor in interest of a testator, who transfers a vested estate of a lesser quantum than that of the vested estate which he has.

Question 4

The fee simple is a greater estate than a fee tail, which is a greater estate than a _________, which is a greater estate than the leasehold estates.

Answer 4

Life Estate

Question 5

If O, owning a fee simple, creates a fee tail, a life estate, or a term of years, and does not at the same time convey away a vested remainder in the fee simple, O has a ___________.

Answer 5

Reversion

Question 6

O conveys Blackacre “to A for life.” O has a ________ in fee simple that is certain to become possessory. At A’s death, either O or O’s successors in interest will be entitled to possession.

Answer 6

Reversion

Question 7

O conveys Blackacre “to A for life then to B and her heirs if B survives A.” O has a reversion in fee simple that is not certain to become possessory. If B dies before A, ____ will be entitled to possession at A’s death. On the other hand, if A dies before B, O’s reversion is divested on ___ death and will never become possessory.

Answer 7

O, A’s

In this example, O has a reversion, not a possibility of a reversion. There is no such interest as a “possibility of reversion,” and you should never use that phrase. Such talk is likely to cause confusion of a reversion with an entirely different interest, the possibility of reverter which follows a determinable fee.

Question 8

At common law, a reversion was transferable during ____ and _____ and _____ at death. It remains so today.

Answer 8

life, descendible, devisable

Question 9

This is a future interest remaining in the transferor or his heirs when a fee simple determinable is created. This arises when an owner carves out his estate a determinable estate of the same quantum. This can be retained when a life tenant conveys his life estate to another, determinable on the happening of an event.

Answer 9

Possibility of Reverter

Question 10

O conveys Blackacre “to Hartford School Board so long as used for school purposes.” ___ has a possibility of reverter.

Answer 10

O

Question 11

When an owner transfers an estate subject to condition subsequent and retains the power to cut short or terminate the estate, the ______ has the right of entry.

Answer 11

Transferor

Question 12

O conveys Whiteacre “to Hartford School Board, but if it ceases to use the land for school purposes, ___ has the right to re-enter and retake the premises.

Answer 12

O

Question 13

What are the three types of future interests in transferees?

Answer 13

(1) Vested Remainders
(2) Contingent Remainders
(3) Executory Interests

Question 14

A remainder or executory interest cannot be retained by the transferor; these interest are created only in the _______. Once created, a remainder or executory interest can be transferred back to the _____ but the name originally given the interest does not change.

Answer 14

Transferees, Grantor

Question 15

The earliest form of a ________ was a future interest in a transferee that is certain to become possessory upon the expiration of the prior estate created at the same time.

Answer 15

Remainder

Question 16

“To A for life, then to B and her heirs.” In this conveyance B has a _____ remainder in fee simple. Upon A’s death, ____ or ____ successor in interest is entitled to possession in fee simple.

Answer 16

vested, B, B’s

Question 17

In this situation, the transferor has decided at the outset who is to take the property upon the life tenant’s death.

Answer 17

Vested Remainder

Question 18

This is a remainder created in an unknown person or that has a condition precedent to ultimate possession.

Answer 18

Contingent Remainder

Question 19

Example: Unknown Persons
Martha conveys Blackacre to Kevin for life, then to Ellen’s children. Ellen is 12 years old and has no children. Ellen’s nonexistent children have a ____________. Martha has retained no_________.

Answer 19

Contingent Remainder, Reversion

Question 20

This is a future interest that is capable of becoming possessory at the termination of the prior estate. It is not required that the future interest be certain of future possession, only that it be possible for the interest to become possessory when the prior estate ends.

Answer 20

Remainder

Question 21

A future interest in a transferee that can take effect only by divesting another interest. This was developed to do what a remainder cannot do: divest or cut short the preceding interest.

Answer 21

Executory interest

Question 22

What are the two types of Remainders?

Answer 22

(1) Vested

(2) Contingent

Question 23

A remainder is vested if:

Answer 23

(1) It is given to an ascertained person and
(2) It is not subject to a condition precedent (other than the natural termination of the preceding estates).

A remainder is vested if it is created in an ascertained person and is ready to become possessory whenever and however all preceding estates expire.

Question 24

A remainder is contingent if:

Answer 24

(1) It is given to an unascertained person or
(2) it is made contingent upon some event occurring other than the natural termination of the preceding estates. (remainder is said to be subject to a condition precedent)

In either (1) or (2) the remainder is not now ready to become possessory upon the expiration of the preceding estate.

Question 25

This remainder is certain to become and remain possessory. Nothing will prevent posssession from happening eventually, and once possession occurs, it will last forever.

Answer 25

Indefeasibly Vested

Question 26

O conveys "to A for life, then to B and her heirs." B has an ___________ remainder certain to become possessory upon termination of the life estate. If B dies during A's life, on B's death B's remainder passes to B's devisees, or, if B dies without a will, passes to B's heirs, or, if B dies without a will and without heirs, escheats to the state. B or B's successor in interest is certain to take possession upon A's death.

Answer 26

Indefeasibly Vested

Question 27

This is a remainder created in a known person and not subject to any condition precedent, but is subject to a condition subsequent that, if it occurs, will completely divest the remainderman of his interest.

Answer 27

Vested remainders subject to complete divestment

Question 28

This remainder created in a class (or group) of grantees, at least one of who is presently existing and entitled to possession as soon as the preceding estate expires, but which is capable of possession as soon as the preceding estate expires, but which is capable of expansion to include as yet unknown people. It is called subject to open because the class is left to open for the entry of new members.

Answer 28

Vested remainders subject to open or partial divestment

Question 29

Whenever a grant creates an interest in a group of people, it is a ________. The group can be any ascertainable body of people, but is most often a family group. (To my children, two my surviving nieces and nephews, to my grandchildren who have reached age 21)

Answer 29

Class Gift A class is OPEN if it is possible for new people to enter it, and is CLOSED if new entrants are not possible.

Question 30

This must be expressed in the grant. Neither the natural expiration of the prior estate nor precatory language in the grant constitutes this. Example of this: Harry conveys Elderfield to Annie for life, then to Eileen if she graduates from Harvard. The condition of graduation from Harvard is expressed in the grant and is a _________ to Eileen's possession.

Answer 30

Condition precedent, Condition precedent

Question 31

Future interests in a grantee that divest either: (1) another grantee's possessory or future interest (a shifting executory interest) or (2) the grantors interest at some future time (a springing executory interest)

Answer 31

Executory Interest

Question 32

Henry VIII resolved to end this tax avoidance and did so by forcing the _________ (1535) upon an unwilling Parliament. This simply converted the beneficial interests in uses to legal interests. Because this "executed" the use the term executory interest eventually was bestowed on those future interests that would have been beneficial interests in a springing use or a shifting use prior to its adoption.

Answer 32

Statute of Uses

Question 33

A future interest created in a grantee that divests the grantor at some future time after the conveyance. Thus, it "springs" out of the grantor.

Answer 33

Springing executory interests

Question 34

A future interest in a grantee that divests another grantee upon the occurrence of some condition. By such divestiture, the shifting executory interest cuts short the preceding estate prior to its natural expiration.

Answer 34

Shifting executory interests

Question 35

What is this an example of? Ron conveys Waterfront to Alex, but if Sarah should ever be released from prison, to Sarah. Sarah has a ______ interest that will divest Alex, another grantee, by cutting short his fee simple subject to an executory limitation if and when Sarah is released from prison.

Answer 35

Shifting executory interests

Question 36

Example: Oscar conveys Arrowsmith to Margot for life, then to Connie and her heirs. Connie's remainder is ______ because she is a known person and there is no condition precedent to her possession. Whenever Margot dies, Connie (or her legal successor) is ready to take possession of Arrowsmith.

Answer 36

Vested

Question 37

A remainder may be vested but not certain of becoming possessory. It can be vested subject to being divested if an event happens. Example: O conveys "to A for life, then to B and her heirs, but if B does not survive A to C and his heirs." B does not have a contingent remainder. B has a ___________ in fee simple subject to _________. C has a shifting executory interest which can become possessory only by __________ B's remainder.

Answer 37

Vested Remainder, divestment, divesting

Question 38

A remainder created in a class of persons (such as in A's children) is vested if one member of the class is ascertained, and there is no ____________.

Answer 38

Condition Precedent

Question 39

The remainder is ______ or ______ if later-born children are entitled to share in the gift.

Answer 39

vested subject to open, vested subject to partial divestment

Question 40

O conveys "to A for life, then to A's children and their heirs." A has one child, B. The remainder is ______ in B subject to open to let in later-born children. B's exact share cannot be known until ___ dies. IF A has no child at the time of the conveyance, the remainder is _______ because no taker is ascertained.

Answer 40

Vested, A, Contingent

Question 41

A remainder that is contingent because its takers are unascertained is illustrated by the following example: O conveys "to A for life, then to the heirs of B." B is alive. the remainder is _______ because the heirs of B cannot be ascertained until B dies.

Answer 41

Contingent

Question 42

A remainder that is contingent because it is subject to a condition precedent is illustrated in the following Examples: (1) O conveys "to A for life, then to B and her heirs if B survives A." The language if B survives A subjects B's remainder to a __________. B can take possession only if ___ survives ___. (2) O conveys "to A for life, then to B and her heirs if B survives A, and if B does not survive A to C and his heirs." The language if B survives a subjects B's remainder to the condition precedent of B surviving A, and the language and if B does not survive A subjects C's remainder to the opposite ______. He we have _________ remainders in B and C. If the remainder in B vests, the remainder in __ cannot, and vice versa.

Answer 42

(1) Condition precedent, B, A | (2) Condition precedent, alternative contingent remainders, C

Question 43

Whether a remainder is vested or contingent depends upon the language employed. If the conditional element is incorporated into the description of, or into the gift to, the remainderman, then the remainder is ______; but if, after words giving a vested interest, a clause is added divesting it, the remainder is _____.

Answer 43

Contingent, Vested

Question 44

In classifying future interests after a life estate, you can bet on this rule: If the first future interest created is a contingent remainder in fee simple, the second future interest in a transferee will also be a ________. If the first future interests created is a vested remainder in fee simple, the second future interest in a transferee will be a divesting ___________.

Answer 44

Contingent remainder, Executory interest

Question 45

True or False: | The law has continued to assume that a life estate can end prior to the death of the life tenant.

Answer 45

True

Question 46

This is created when an owner of a possessory estate grants a lesser possessory estate to someone, thus necessarily creating a future right to possession when the lesser estate expires.

Answer 46

Future Interests

Question 47

Future interests may be created in the grantor, in which case they are either a reversion, a possibility of reverter, or a right of re-entry, or in third-party transferees, in which case they are called either a _______ or an _______.

Answer 47

remainder, executory interest

Question 48

A ________ is a right of possession that depends upon the satisfactory resolution of some uncertainty or uncertainties.

Answer 48

Contingent future interest

Question 49

A _______ is certain to become possessory at some future time. Some future interest are called this even though there may be an unresolved uncertainty. The principal examples are the ________, the ______, and _________.

Answer 49

possibility of reverter, right of re-entry, vested remainders subject to partial or complete divestment

Question 50

Remainders are future interests that become possessory after the natural expiration of the prior possessory estate. Remainders almost always follow a _____. Remainders are classified as _____ or ______.

Answer 50

Life estate, vested, contingent

Question 51

This rule holds that if a gift to one member of the class might vest too remotely the whole class gift is void. ``` Alternate Definition: Under the Rule of Perpetuities a class gift is not vested in any member of the class until the interests of all members have vested. ```

Answer 51

All or Nothing Rule

Question 52

A gift that is vested ______ is not vested under the Rule Against Perpetuities. For a class gift to be vested under the Rule, the class must be ______ (that is, each and every member of the class must be in existence and identified), and all conditions precedent for each and every member of the class must be satisfied, within the perpetuities period.

Answer 52

Subject to open, Closed

Question 53

Suppose a gift "to A for life, then to A's children," and A has living one child, B. B's remainder is vested subject to open, but it is not vested under the Rule Against Perpetuities until A dies and all of A's children are then in existence and identified. But because the remainder beneficiaries will all be ascertained at A's death, the remainder is ______. (Valid or Invalid?)

Answer 53

Valid

Question 54

this rule cuts off the possibility of new entrants to a class at the earlier of two times: (1) the natural or physiological, closing of the class, that is, when the possibility of births (or adoptions) ends (e.g. the death of a class's ancestor); or (2) the premature or artificial closing of the class through the operation of the rule of convenience.

Answer 54

Class Closing Rule (the rule of convenience)

Question 55

Under this rule, the class closes "on the distribution date if the beneficiary of the class gift is then entitled to distribution."

Answer 55

Rule of Convenience (Restatement 3rd of Property 15.1)

Question 56

The main inconvenience of keeping the class open beyond the distribution date its that the distributees would receive a ___________ interest, and such an interest is considerably less useful to them than the one that is indefeasible.

Answer 56

Defeasible

Question 57

The rule of convenience may save an otherwise invalid interest under the common law Rule Against Perpetuities. Suppose T devised assets "to such of A's children as survive to age 25." At the time of T's death A was alive and had two children, X and Y, ages 26 and 22, respectively. The fact that A survived T ordinarily means that more members may be added to the class of persons who have an interest in the executory interest given to A's children who survive to age 25. That possibility creates a scenario under which the executory interest is void under the Rule Against Perpetuities A might have another child, Z immediately after which A, X, and Y all die. If Z's interest vests, it will do so more than 21 years after the deaths of the relevant lives in being. Under the Rule of Convenience, however, because X had reached 25 by the time of T's death the class _______ prematurely at T's death. Any child born to or adopted by A after T's death is not added to the class, saving the class gift. The children who were living at T's death constitute their own validating lives.

Answer 57

Closes

Question 58

Future interests retained by the _____ - reversions, possibilities of reverter, and rights of entry - are not subject to the Rule Against Perpetuities. The are treated as _____ as soon as they arise.

Answer 58

Transferor, vested

Question 59

O conveys Blackacre "to the School Board so long as it is used for a school." The School Board has a ______________; O has a possibility of reverter exempt from the Rule Against Perpetuities.

Answer 59

Fee simple determinable

Question 60

O conveys Blackacre "to the School Board, but if it ceases to use Blackacre for school purposes, O has a right to re-enter." The School Board has a _______________; O has a right of entry exempt from the Rule Against Perpetuities.

Answer 60

Fee simple subject to condition subsequent

Question 61

O conveys Blackacre "to the School Board so long as it is used for a school, then to A and her heirs." A's executory interest _____ the Rule Against Perpetuities. It will not necessarily vest within A's lifetime or within 21 years after A's death. It may vest and become possessory centuries from now. When an interest violates the Rule Against Perpetuities, it is struckout and the remaining valid interests stand. Take a pencil and line out the void gift, "then to A and her heirs." This leaves a fee simple determinable in the School Board. Since O has not given away O's entire interest, O has a ___________.

Answer 61

Violates, Possibility of Reverter

Question 62

O conveys Blackacre "to the School Board, but if it ceases to use Blackacre for school purposes to A and her heirs." The School Board has a ___________. A's executory interest violates the Rule Against Perpetuities. Strike it out, beginning with "but if it ceases..." This leaves standing a conveyance "to the School Board." The School Board has a _________.

Answer 62

Fee simple subject to (a purported) executory interest, Fee simple absolute

Question 63

The common law Rule Against Perpetuities has been reformed in over half the American states by adoption of wait-and-see statutes. Many jurisdictions also attempt to save interests by __________, if possible, and some are willing to engage in _________ in order to save interests created by it from destruction.

Answer 63

Construction of the grant, reformation of the grant

Question 64

This statutory reform evaluates the validity of future interests under the Rule Against Perpetuities as events unfold, not at the time of creation of the interests. The focus under ______ is on what actually happens, not what might happen.

Answer 64

Wait-and-see

Question 65

About two-thirds of the non-USRAP wait-and-see states wait for the period permitted by the common law Rule Against Perpetuities. This means that you must still determine the appropriate measuring or validating life for the interest in question, even if it wont work to validate the interest under the common law rule, and then wait for that life (or lives) to expire plus 21 years.

Answer 65

Wait-and-see for the common law period

Question 66

This provides for waiting for a maximum of 90 years after the creation of the interest to see whether it has vested. This avoids the necessity of locating the lives that measure the common law perpetuities period but may (in some cases) permit uncertainty to persist for a longer period than under wait-and-see for the common law period. If, at the end of the 90-year wait, an interest is still nto vested or lapsed, this commands that the contingent interest be judicially reformed to vest within the 90-year period and conform as closely as possible to the grantor's intent.

Answer 66

USRAP: Wait-and-see for 90 years