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Bar Review: Real Property > Estates & Future Interests > Flashcards

Flashcards in Estates & Future Interests Deck (12):
1

A fee simple subject to an executory interest is an estate that:

A. Automatically divests in favor of a third party on the happening of a stated event
B. Continues after the happening of a stated event until the grantor exercises her power of termination
C. Continues after the happening of a stated event until the third party exercises his power of termination
D. Automatically terminates on the happening of a stated event and reverts to the grantor

A. Automatically divests in favor of a third party on the happening of a stated event

A fee simple subject to an executory interest is an estate that automatically divests in favor of a third party (rather than the grantor) on the happening of a stated event. It is created by the same language used to create a fee simple determinable (e.g., “for so long as,” “while,” “during,” or “until”) or a fee simple subject to a condition subsequent (e.g., “upon condition that,” “provided that,” “but if,” or “if it happens that”), but rather than automatically reverting to the grantor on the happening of a stated event (fee simple determinable) or continuing after the happening of a stated event until the grantor exercises her power of termination (fee simple subject to a condition subsequent), it automatically divests in favor of a third party on the happening of a stated event. A fee simple subject to an executory interest is not an estate that continues after the happening of a stated event until the third party exercises his power of termination. An estate that continues on the happening of a stated event until the grantor exercises her power of termination (right of entry) is a fee simple subject to a condition subsequent. A right of entry can be created only in favor of the grantor and her heirs. If a similar interest is created in favor of a third party, it is called an executory interest. However, unlike a right of entry, the third party need not “exercise” his executory interest; on the happening of the stated event, the estate automatically divests in his favor. The common law did not recognize a future interest created in a third party that would vest in possession only upon the discretionary exercise of a right or power by the third party. A fee simple subject to an executory interest is not an estate that automatically terminates on the happening of a stated event and reverts to the grantor. As explained above, such an estate is a fee simple determinable. A fee simple subject to an executory interest is not an estate that continues after the happening of a stated event until the grantor exercises her power of termination. As explained above, such an estate is a fee simple subject to a condition subsequent.

2

Which future interest follows a gap in possession or divests the estate of the transferor?

A. Springing executory interest
B. Shifting executory interest
C. Vested remainder subject to total divestment

A. Springing executory interest

A springing executory interest is a future interest that follows a gap in possession or divests the estate of the transferor. A conveyance from “O to A for life, and one year after A’s death to B” creates a life estate in A, a reversion in O (the transferor), and a springing executory interest in B, because it springs out of O’s reversion. A vested remainder subject to total divestment does not follow a gap in possession or divest the estate of the transferor. A remainder is a future interest that is created in a transferee and is capable of becoming a present interest upon the natural termination of the preceding estate. Generally, a remainder follows a life estate. A vested remainder subject to total divestment is a remainder created in an ascertained person in being whose interest is not subject to a condition precedent but is subject to being defeated by the happening of some condition subsequent. A conveyance from “O to A for life, then to B; but if B predeceases A, to C” creates a life estate in A, a vested remainder subject to total divestment in B (because B is an ascertained person in being whose interest is subject to being divested if she does not survive A), and a shifting executory interest in C (see below). A shifting executory interest does not follow a gap in possession or divest the estate of the transferor. A shifting executory interest is a future interest that divests the interest of another transferee. In the above example, C has a shifting executory interest because it would divest the interest of B (another transferee).

3

If T devises property “to A for life, then to B’s children,” and B has at least one child living at all relevant times, when does the class of “B’s children” close?

A . At T’s death
B. At A’s death
C. At B’s death
D. When the will is executed

B. At A’s death

If T devises property “to A for life, then to B’s children,” and B has at least one child living at all relevant times, the class of “B’s children” closes at A’s death. Under the rule of convenience, a class closes when some member of the class can call for a distribution of her share of the gift. When possession and enjoyment of a gift are postponed, as where the gift follows a life estate, the class remains open until the time fixed for distribution (e.g., death of the life tenant). At T’s death, the will becomes effective and A’s life estate begins. At that time, B’s child or children will have a vested remainder subject to open because the interest is certain to take on the termination of A’s life estate but also could be partially divested by B’s unborn children. At A’s death, B’s child or children will be entitled to distribution of the property, so the class will close at that time. Any children born to B after A’s death will be excluded by the rule of convenience. If T devises property “to A for life, then to B’s children,” and B has at least one child living at all relevant times, the class of “B’s children” does not close at T’s death. As stated above, pursuant to the rule of convenience, when the beneficiaries of a postponed gift are a class, the class closes at the time fixed for distribution, not at the time the interest becomes effective. Although T’s will becomes effective at T’s death, the class does not close until B’s child or children are entitled to distribution of the property—i.e., when A’s life estate terminates (at A’s death). If T devises property “to A for life, then to B’s children,” and B has at least one child living at all relevant times, the class of “B’s children” does not close at B’s death. As stated above, any children born to B after A’s death will be excluded from the class by the rule of convenience. Note, however, that the rule of convenience will not be followed if contrary to the grantor’s or testator’s expressed intent. Thus, if instead T’s will had said “to A for life, then to B’s children, including children born to B after A dies,” the class would remain open until B’s death. If T devises property “to A for life, then to B’s children,” and B has at least one child living at all relevant times, the class of “B’s children” does not close when the will is executed. The will does not become effective until T’s death, and the time fixed for distribution is not until A’s death. Thus, as explained above, the class remains open until A dies.

4

In the case of a deed, the perpetuities period begins to run on the date:

A. The deed is acknowledged before a notary
B. The deed is signed by the grantor
C. The deed is signed by the grantee
D. The deed is delivered with the intent to pass title

D. The deed is delivered with the intent to pass title

In the case of a deed, the perpetuities period begins to run on the date the deed is delivered with the intent to pass title. The validity of interests under the Rule Against Perpetuities is determined at the time the interests are created. For a deed, this is the date of delivery, not the date the deed is signed by the grantor or the grantee. In the case of a deed, the perpetuities period does not necessarily begin to run on the date the deed is acknowledged before a notary. Delivery is presumed if a deed is both acknowledged by the grantor and recorded, but even so, this presumption is rebuttable.

5

In the case of a deed, the perpetuities period begins to run on the date the deed is:

A. Recorded
B. Delivered with intent to pass title
C. Signed by the grantor

B. Delivered with intent to pass title

In the case of a deed, the perpetuities period begins to run on the date the deed is delivered with intent to pass title. The validity of interests under the Rule Against Perpetuities is determined at the time the interests are created. Because a deed is not effective to transfer an interest in property until it has been delivered with the intent to pass title, the perpetuities period does not begin to run until that time. Thus, the perpetuities period does not begin to run on the date the deed is signed by the grantor or recorded.

6

In general, a life tenant commits permissive waste when he:

A. Substantially changes the use of the property in a way that increases its value
B. Fails to make required repairs to the land or pay required carrying charges
C. Consumes or exploits natural resources on the property

B. Fails to make required repairs to the land or pay required carrying charges

In general, a life tenant commits permissive waste when he fails to make required repairs to the land or pay required carrying charges (e.g., interest on encumbrances, ordinary taxes). When a life tenant consumes or exploits natural resources on the property (e.g., timber, minerals, oil), he commits voluntary waste. However, exceptions to this rule allow the life tenant to consume or exploit such resources:(i) in reasonable amounts when necessary for repair and maintenance of the land;(ii) when the life tenant is expressly given the right to exploit such resources in the grant (e.g., a mineral lease);(iii) when prior to the grant, the land was used in exploitation of such natural resources, so that the grantor most likely intended the life tenant to have the right to exploit; and(iv) in many states, when the land is suitable only for such exploitation (e.g., a mine). When a life tenant substantially changes the use of the property in a way that increases its value (e.g., he demolishes a run-down building), he commits ameliorative waste.

7

A grantor who conveys a lesser estate than the grantor owns retains __________.

A. A possibility of reverter
B. A reversion
C. No interest
D. A right of entry

B. A reversion

A grantor who conveys a lesser estate than the grantor owns retains a reversion. For example, where O has a fee simple, a conveyance from “O to A for life” creates a life estate in A and a reversion in O. A possibility of reverter is the future interest retained by a grantor who conveys a fee simple determinable. A conveyance from “O to A for so long as/while/during/until [event]” creates a fee simple determinable in A and a possibility of reverter in O. A right of entry is the future interest retained by a grantor who conveys a fee simple subject to a condition subsequent. A conveyance from “O to A upon condition that/provided that/but if/if it happens that [event], then O or her heirs may enter and terminate the estate” creates a fee simple subject to a condition subsequent in A and a right of entry in O.

8

If A and B own property as joint tenants, and B dies leaving a will devising her interest in the property to C, who owns the property?

A. C only
B. A and C, as joint tenants
C. A and C, as tenants in common
D. A only

D. A only

If A and B own property as joint tenants, and B dies leaving a will devising her interest in the property to C, A only owns the property. A testamentary disposition by one joint tenant will not sever a joint tenancy. A will devising a joint tenant’s interest to another is inoperative as to joint tenancy property because when the co-tenant who is the testator dies (which is when the will becomes effective), her rights in the joint tenancy property are extinguished, and the will has no effect on them. Thus, upon B’s death the property is freed from her concurrent interest, leaving A the sole owner and C with no interest in the property. On the other hand, certain acts by one joint tenant will sever a joint tenancy (e.g., suit for partition, inter vivos conveyance by one joint tenant, execution of a mortgage by one joint tenant in a title theory state). Then, the transferee takes the interest as a tenant in common and not as a joint tenant. Thus, if B had successfully conveyed her interest to C by deed, A and C would own the property as tenants in common but not as joint tenants. Alternatively, if A and B had owned the property as tenants in common, B’s will would have effectively conveyed her interest to C, so that A and C would own the property as tenants in common. Furthermore, C only would be incorrect in any event because B can convey no greater interest than the one-half interest she owns.

9

If A, B, and C own property as joint tenants, and A conveys his interest to D, what interests do the parties own on B’s death?
A. B’s estate, C, and D each own a 1/3 interest
B. C owns a 2/3 interest, and D owns a 1/3 interest
C. C and D each own a 1/2 interest

B. C owns a 2/3 interest, and D owns a 1/3 interest

If A, B, and C own property as joint tenants, and A conveys his interest to D, on B’s death C owns a 2/3 interest, and D owns a 1/3 interest. The distinguishing feature of a joint tenancy is the right of survivorship. When property is held by three or more joint tenants, one joint tenant’s conveyance destroys the joint tenancy only as to that interest. The remaining joint tenants continue to hold in joint tenancy as between themselves, and the grantee holds his interest as a tenant in common with them. When A sold his interest to D, that 1/3 interest was severed and thus converted into a tenancy in common, which D continues to hold. However, the remaining 2/3 interest continues to be held in joint tenancy with right of survivorship between B and C. When one joint tenant dies, the property is freed from her interest, and the survivors retain an undivided right in the property. Since B’s interest was extinguished on her death, B’s estate does not take B’s interest; the surviving joint tenant (C) holds free of it. Thus, C owns a 2/3 interest in the property. C and D do NOT each own a 1/2 interest. This would be the case if D took A’s share as a joint tenant. However, as is explained above, D took as a tenant in common. Thus, D’s share does not increase on B’s death, because he does not have the benefit of the right of survivorship. B’s estate, C, and D do NOT each own a 1/3 interest. As is explained above, B’s estate does not take B’s interest on B’s death.

10

If O conveys property “to A for life, then to B; but if B predeceases A, to C,” what interest does B have?

A. Contingent remainder
B. Vested remainder subject to total divestment
C. Vested remainder subject to open
D. Indefeasibly vested remainder

B. Vested remainder subject to total divestment

If O conveys property “to A for life, then to B; but if B predeceases A, to C,” B has a vested remainder subject to total divestment. A vested remainder subject to total divestment arises when the remainderman is in existence and ascertained and his interest is not subject to any condition precedent, but his right to possession and enjoyment is subject to being defeated by the happening of a condition subsequent. B, an ascertained person in being whose interest is not subject to a condition precedent, has a vested remainder, but his interest is subject to being divested if he does not survive A. B does not have an indefeasibly vested remainder. An indefeasibly vested remainder is a remainder that (i) can be created in and held only by an ascertained person in being, (ii) must be certain to become possessory on the termination of the prior estate, (iii) must not be subject to being defeated or divested, and (iv) must not be subject to being diminished in size. B is an ascertained person in being, but his vested remainder is subject to being divested if he does not survive A. B does not have a vested remainder subject to open. A vested remainder subject to open is a remainder created in a class of persons that is certain to take on the termination of the preceding estate, but is subject to diminution by reason of other persons becoming entitled to share in the remainder. B’s vested remainder is not subject to partial divestment by other remaindermen. B does not have a contingent remainder. A contingent remainder is a remainder that is (i) subject to a condition precedent, or (ii) created in favor of unborn or unascertained persons. B is an ascertained person in being whose interest is not subject to a condition precedent.

11

Which of the following interests in property are not subject to the Rule Against Perpetuities?

A.Rights of first refusal
B. Contingent remainders
C. Reversions
D. Executory interests

C. Reversions

Reversions are not subject to the Rule Against Perpetuities. The Rule Against Perpetuities provides that certain interests in property are void if there is any possibility, however remote, that they may vest more than 21 years after some life in being at the creation of the interest. The Rule applies to the following interests in property: (i) contingent remainders, (ii) executory interests, (iii) class gifts (even if vested remainders), (iv) options and rights of first refusal, and (v) powers of appointment. Future interests in the grantor (i.e., reversions, possibilities of reverter, and rights of entry) are not subject to the Rule.

12

A fee simple determinable is an estate that:

A. Divests in favor of a third person on the happening of a stated event
B. Automatically terminates on the happening of a stated event and reverts to the grantor
C. Continues after the happening of a stated event until the grantor exercises her power of termination

B. Automatically terminates on the happening of a stated event and reverts to the grantor

A fee simple determinable is an estate that automatically terminates on the happening of a stated event and reverts to the grantor. A conveyance from “O to A for so long as/while/during/until [event]” creates a fee simple determinable in A and a possibility of reverter in O. A fee simple determinable is not an estate that continues after the happening of a stated event until the grantor exercises her power of termination. An estate that continues after the happening of a stated event until the grantor exercises her power of termination (right of entry) is a fee simple subject to a condition subsequent. A conveyance from “O to A, upon condition that/provided that/but if/if it happens that [event], O may enter and terminate the estate” creates a fee simple subject to a condition subsequent in A and a right of entry in O. A fee simple determinable is not an estate that divests in favor of a third person on the happening of a stated event. An estate that terminates on the happening of a stated event and divests in favor of a third person, rather than in favor of the grantor, is a fee simple subject to an executory interest. A conveyance from “O to A for so long as/while/during/until [event], then to B” or “provided that/but if/if it happens that [event], then to B” creates a fee simple subject to an executory interest.