Future Interests

Question 1

What are future interests?

Answer 1

Future interests gives its holder the right or possibility of future possession of an estate.

Question 2

What is a vested remainder?

Answer 2

One made in an existing and ascertained person and not subject to a condition precedent.

Question 3

what are the three types of vested reaminders:

Answer 3

(1) the indefeasibly vested remainder
(2) the vested remainder subject to total divestment; and
(3) the vested remainder subject to open.

Question 4

indefeasible vested remainder

Answer 4

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 5

vested remainder subject to total divestment

Answer 5

Subject to a subsequent condition. Right of possession could be cut short because of a condition subsequent.

Question 6

the comma rule

Answer 6

When conditional language in a transfer follows language that, taken alone and set off by commas, would created a vested remainder, the condition is a condition subsequent and you have a vested remainder subject to complete defeasance.

Question 7

vested remainder subject to open

Answer 7

a vested remainder created in a class of persons that is certain to become possessory, but is subject to diminution. (birth of more persons)

Question 8

The Rule Against Perpetuities

Answer 8

provides that certain kinds of future interests are no good if there is any possibility that the interest might vest more than 21 years after a person alive at the time of the grant has died.

Question 9

4-step technique for assessing potential rule against perpetuities problems

Answer 9

Step 1 - determine the interests

Step 2 - how does the future interest holder take?

Step 3 - find the measuring life

Step 4 - when will we know if the future interest holder can take?

Question 10

“Gift to Subclass” Exception

Answer 10

Each gift to a subclass may be treated as a separate gift under the Rule.

Question 11

Per capita gift exception

Answer 11

A gift of a fixed amount to each member of a class is not treated as a class gift under the Rule.

Question 12

What is a trust?

Answer 12

A fiduciary relationship with respect to specific property (res) wherein the trustee holds legal title to the property subject to enforceable equitable rights in a beneficiary.

Question 13

Application of Rule Against Perpetuities (trusts)

Answer 13

Applies to the equitable future interests of the beneficiaries in a private trust just as it does to “legal” future interests

Question 14

The Rule against Restraints on Alienation

Answer 14

Generally, any restriction on the transferability of a legal (as opposed to equitable) interest is void.

Question 15

Three types of restraints on alienation:

Answer 15

1. disabling restraints
2. forfeiture restraints
3. promissory restraints

Question 16

Restraints on a Fee Simple

Answer 16

All absolute restraints on fee simple estates are void, thus, any restriction falls away and the grantee may freely transfer the property.

Forfeiture or promissory restraints on fee simple estates for a limited time and reasonable purpose may be upheld.

Question 17

Is a remainder a future interest in a grantor?

Answer 17

No, A remainder is a future interest created in a grantee rather than a grantor. A remainder must be expressly created in the instrument creating the intermediate possessory estate. A conveyance from “O to A for life, then to B” creates a life estate in A and a remainder in B.

Question 18

Is the cutting of mature trees to clear the land a way for a life tenant to be liable for waste?

Answer 18

At common law, the cutting of mature trees to clear the land for cultivation would subject a life tenant to liability for waste.

Voluntary waste occurs when a life tenant consumes or exploits natural resources on the property (e.g., timber, minerals, oil). Ameliorative waste consists of acts that economically benefit the property. Although clearing the land for cultivation may economically benefit the property, the life tenant would be liable for voluntary and/or ameliorative waste.

Question 19

How does a life tenant commit permissive waste?

Answer 19

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).

Question 20

If O conveys property “to A, but if the premises cease to be used for recreational purposes, then to B,” what interests do the parties have in a jurisdiction that follows the common law Rule Against Perpetuities?

Answer 20

A has a fee simple absolute and B and O have no interest.

Question 21

What is the rule of convenience?

Answer 21

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).