Future Interests Flashcards
(27 cards)
Present Possessory Estates
- Fee Simple Absolute
- Defeasible Fees (Fee Simple Determinable, Fee Simple Subject to Condition Subsequent, and Fee Simple Subject to an Executory Interest)
- Life Estate
- Fee Tail (mostly abolished)
Fee Simple Absolute
- “To A” or “To A and his heirs”
- Presumed in the absence of express contrary intent
- Absolute ownership of indefinite or potentially indefinte duration
- Freely transferrable, devisable by will & descendible through intestacy
- No accompanying future interest
Defeasible Fees
Defeasible fees are fee simple estates (that is, they are of uncertain or potentially indefinite duration) that can be terminated upon the happening of a stated event.
Think of them as – “to A” with a catch (condition attached) that renders the estate subject to the risk of forefeiture.
Three types:
* Fee Simple Determinable
* Fee Simple Subject to Condition Subsequent
* Fee Simple Subject to an Executory Interest
Fee Simple Determinable
- Created by durational language, such as “to A for as long as…” “to A while…” “to A during…” or “to A until…”
- DETAILS: Freely transferable, devisable by will, and descendible through intestacy, but always subject to the attached condition
- DUATION: As long as condition is met, then automatically to grantor
- FUTURE INTEREST: Grantor has a possibility of reverter.
A possibility of reverter is transferable, divisible by will, and descendible by intestacy.
Fee Simple Subject to Condition Subsequent
- “To A & his heirs, but if…” “upon condition that…” “provided that…”
- A fee simple subject to a condition subsequent is an estate in which the grantor reserves the right to terminate the estate upon the happening of a stated event, meaning the estate doesn’t automatically terminate – the grantor must take some action.
- DETAILS: Freely transferable, devisable by will, and descendible through intestacy, but always subject to the attached condition
- DURATION: Until happening of named event and reentry by grantor (grantor’s prerogative)
- FUTURE INTEREST: Grantor has right of entry.
Most courts hold that rights of entry are not transferable inter vivos, but most states agree they are devisable by will, and all states agree they are descendible through intestacy.
Fee Simple Subject to an Executory Interest
- “To A & his heirs for so long as… and if not, to B” OR “To A & his heirs, but if… to B”
- If a fee simple estate terminates upon the happening of a stated event (because it is determinable or subject to a condition subsequent) and then passes to a third party rather than reverting to the grantor or giving the grantor a right to terminate, the third party has an executory interest. This estate is just like the fee simple determinable, only now, if the condition occurs, the estate is automatically forfeited in favor of someone other than the grantor.
- DURATION: As long as condition is met, or until happening of event
- FUTURE INTEREST: Third party has executory interest
Fee Tail
- “To A & the heirs of his body”
- The fee tail is an estate where inheritability is limited to lineal heirs.
- DURATION: Until A and his line die out
- FUTURE INTEREST: Reversion in grantor
- BUT: Most jurisdictions have abolished the fee tail, and an attempt to create one results in a fee simple.
Life Estates (in General)
- The life estate is an estate that must be measured in explicit lifetime terms, and never in terms of years
- Can be for the life of the grantee or for the life of another
- Future interest may be held by the grantor or a third party
Life Estate
- “To A for life” OR “To A for the life of B” OR “To A for life, then to B”
- DURATION: Until the end of the measuring life
- FUTURE INTEREST: If held by the grantor, it is a reversion; if held by third party it is a remainder
Defeasible Life Estates
- “To A for life, but if… to B”
- DURATION: Until the end of the measuring life or the happening of the named event
- FUTURE INTEREST: If held by the grantor, it is a reversion; if held by third party it is a executory interest
Characteristics of a Life Estate
The life tenant is entitled to all ordinary uses and profits from the land.
The life tenant must not commit waste (voluntary, permissive, or ameliorative)
A life tenant thus can’t do anything that injures the interests of a remainderman or holder of the reversion. A future interest holder may sue for damages or to enjoin such acts, and if they spend to perform the life tenant’s obligations, they are entitled to reimbursement.
Affirmative (Voluntary) Waste
Voluntary (or affirmative) waste is actual, overt conduct that causes a drop in value.
A life tenant depleting the property’s natural resources could constitute voluntary waste. Thus, exploitation of natural resources by a life tenant is generally limited to situations when:
(1) necessary for repair or maintenance of the land;
(2) the land is suitable only for such use; or
(3) it’s expressly or impliedly permitted by the grantor.
Under the open mines doctrine, if mining was done on the land prior to the life estate, the life tenant can continue mining – but they’re limited to the mines already open.
Permissive Waste
Permissive waste occurs when a life tenant fails to comply with their duties, such as by allowing land to fall into disrepair or by failing to reasonably protect the land.
A life tenant is obligated to:
(1) Preserve the land and structures in a reasonable state of repair
(2) Pay ordinary taxes on the land (limited to the extent of the total income or profits generated from the land since the life tenant acquired ownership, or if there is no income or profit, on the premises’ fair rental value).
(3) Pay interest on mortgages (not principal) AND
(4) Pay special assessments for public improvements of short duration.
Note that a life tenant is not obligated to insure the premises for the benefit of the remaindermen and is not responsible for damages caused by a third-party tortfeasor.
Ameliorative Waste
Ameliorative waste is a change that benefits the property economically.
The life tenant can’t engage in acts that will enhance the property’s value, unless all future interest holders are known and consent.
Ameliorative waste was actionable at common law, but now a life tenant may alter or even demolish existing buildings if:
(1) the market value of the future interest is not diminished; and either
(2) the remaindermen do not object; or
(3) a substantial and permanent change in the neighborhood conditions has deprived the property in its current form of reasonable productivity or usefulness.
Future Interests in Grantor
- Possibility of Reverter
- Right of Entry, or
- Reversion
Possibility of Reverter
- A future interest held by grantor
- Correlative present interest: FEE SIMPLE DETERMINABLE
- Estate automatically reverts to grantor upon occurrence of stated event
- Transferable, descendible & devisable
Right of Entry
- A future interest held by grantor
- Correlative present interest: FEE SIMPLE SUBJECT TO CONDITION SUBSEQUENT
- Estate does not automatically reverts; grantor must exercise right of entry
- Descendible & devisable, but some courts hold not transferable inter vivos
Reversion
- A reversion is the estate left in a grantor who conveys less than they own (e.g. 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 right to entry – the future interest that arises is a reversion.
- Correlative present interest: LIFE ESTATE
- 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.
Future Interests in Third Parties
A contingent remainder, OR
A vested remainder (of which there are three types)
(1) the indefeasibly 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.
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.
Subject to RAP
A few technical rules at common lwa are no longer applicable:
* Destructability of contingent remainder
* Rule in Shelley’s case
* Doctrine of Worthier Title
A remainder created in unborn or unascertained persons is contingent because until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends.
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.
Indefeasibly Vested Remainder
A vested remainder is one created in an existing and ascertained person, and not subject to a condition precedent.
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.
Vested Remainder Subject to Total Divestment
A vested remainder is one created in an existing and ascertained person, and not subject to a condition precedent.
A vested remainder subject to total divestment is subject to a condition subsequent.
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.
NOTE: Distinguishing Conditions Subsequent and Precedent
A condition precedent creates a contingent remainder and a condition subsequent 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 a complete defeasance.
Note that where language is ambiguous, the preference is for vested remainders subject to divestment rather than contingent remainders or executory interests.
Vested Remainder Subject to Open
A vested remainder is one created in an existing and ascertained person, and not subject to a condition precedent.
A vested remainder subject to open is a vested remainder created in a class of persons (e.g. “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.
Executory Interests
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 that they must take effect by cutting short some interest – either in another person (shifting) or in the grantor or the grantor’s heirs (springing).
