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Flashcards in Future interests Deck (41):
1

Categories of future interests

Future interests capable of creation in the grantor
1. Possibility of reverter
2. Right of entry (a.k.a. power of termination)
3. Reversion

Future interests in transferees
4. Vested remainder
5. Contingent remainder
6. Executory interest

2

Possibility of reverter accompanies...

Fee simple determinable

3

Right of entry accompanies...

Fee simple subject to condition subsequent

4

Reversion

Future interest that arises in a grantor who transfers and estate of lesser quantum than she started with (other than a fee simple determinable or a fee simple subject to condition subsequent).

5

Categories of future interests capable of creation in the grantor

1. Possibility of reverter
2. Right of entry (a.k.a. power of termination)
3. Reversion

6

Categories of future interests in transferees

4. Vested remainder
5. Contingent remainder
6. Executory interest

7

Types of vested remainder

1. Indefeasibly vested remainder
2. Vested remainder subject to complete defeasance/total divestment
3. Vested remainder subject to open

8

Types of executory interest

1. Shifting
2. Springing

9

What is a remainder?

A future interest created in a grantee that is:
1. capable of becoming possessory upon the expiration of a prior possessory estate
2. created in the same conveyance in which the remainder is created.

10

Remainderman personality

1. Sociable
2. Patient and polite

11

Remainderman is sociable

Remainderman never travels alone.

Always accompanies a preceding estate of KNOWN, FIXED DURATION.

* Usu. a life estate or term of years.

12

Remainderman is patient and polite

Remainderman waits patiently for the present estate to end—never follows a defeasible fee.

Remainderman cannot cut short or divest a prior transferee.

13

Vested remainder

Remainder is vested if it is BOTH:
1. created in an ascertained person, and
2. is NOT subject to a condition precedent

14

Contingent remainder

Remainder is contingent if it is EITHER:
1. created in an unascertained person, or
2. subject to a condition precedent
(or both).

15

Condition precedent

A condition is a condition precedent when it appears before the language creating the remainder or is woven into the grant to remainderman.

* a.k.a. prerequisite to taking

16

Rule of destructibility of contingent remainders

1. At common law, a contingent remainder was destroyed if it was still contingent at the time the preceding estate ended. Then, the contingent remainder was destroyed, and O or O's heirs would take in fee simple absolute.

E.g., "To A for life, and if B has reached age 21, to B." A dies, and B is only 19. B's contingent remainder was destroyed.

2. Today, the destructibility rule has been abolished.

E.g., Thus, in the example above, O or O's heirs would hold the estate subject to B's springing executory interest. Once B reaches 21, B takes.

17

Rule in Shelley's Case

O conveys "To A for life, then, on A's death, to A's heirs." A is alive.

1. At common law, the present and future interests merge, giving A a fee simple absolute. Rule was a rule of law, not construction, so it would apply even with contrary grantor intent.

2. Today, rule has been virtually abolished. A has a life estate; A's heirs have a contingent remainder; O has a reversion (since A could die without heirs).

18

Doctrine of worthier title

(a.k.a. "rule against a remainder in grantor's heirs")

Applies when O, who is alive, tries to create a future interest in his heirs.

E.g., O, who is alive, conveys "To A for life, then to O's heirs." The contingent remainder in O's heirs is void. A has a life estate; O has a reversion.

* Rule of construction, not a rule of law, so grantor's intent controls.

19

Types of vested remainders

1. Indefeasibly vested remainder
2. Vested remainder subject to complete defeasance/total divestment
3. Vested remainder subject to open

20

Indefeasibly vested remainder

The holder of the remainder is certain to acquire an estate in the future, with no strings attached.

E.g., "To A for life, remainder to B." A and B are alive. A has a life estate; B has an indefeasibly vested remainder.

21

Vested remainder subject to complete defeasance/total divestment

1. Remainderman exists.
2. No condition precedent
3. BUT right to possession could be cut short because of a CONDITION SUBSEQUENT.

E.g., "To A for life, remainder to B, provided, however, that if B dies under the age of 25, to C." A is alive; B is 20.
– B has a vested remainder subject to complete defeasance
– If B is under 25 at A's death, B still takes; however, B must live to 25 for his estate to retain his interest.
– A has a life estate; C has a shifting executory interest; O has a reversion (because it's possible that neither C nor C's heirs will exist if/when the condition is breached).

22

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 there is a vested remainder subject to complete defeasance.

By contrast, if the conditional language appears before the language creating the remainder, the condition is a condition precedent, and there is a condition remainder.

23

Vested remainder subject to open

A remainder is vested in a group of takers,
1. at least one of whom is qualified to take,
2. but each class member's share is subject to partial diminution because additional members can still join in.

E.g., "To A for life, then to B's children." A is alive. B has two children, C and D. C and D have vested remainders subject to open.

24

A class is open if:

Others can still join.

25

A class is closed when:

NO others can join.

26

When is a class closed?

Whenever any member can demand possession (common law rule of convenience).

27

Rule of convenience

A class closes whenever any member can demand possession.

28

Womb rule

A child in the womb will share in the class.

29

Executory interests

A future interest created in a transferee (3d party),
1. which is not a remainder, and
2. which takes effect by either cutting short some interest in another person ("shifting") or in the grantor or his heirs ("springing").

30

Shifting executory interest

Follows a defeasible fee and cuts short someone other than the grantor.

E.g., "To A and her heirs, but if B returns from Canada sometime next year, to B and his heirs." B has a shifting executory interest.

31

Springing executory interest

Cuts short O, the grantor.

E.g., "To A, if and when he marries." A is unmarried. A has a springing executory interest. O has a fee simple subject to A's springing executory interest.

32

Rule against perpetuities

Certain future interests are void if there is ANY POSSIBILITY, however remote, that the interest may vest more than 21 years after the death of a measuring life.

* Except charity-to-charity gifts.

33

Rap applies to...

ONLY
1. Contingent remainders
2. Executory interests
3. Some vested remainders subject to open.

34

Rap analysis

1. Classify the future interest
2. What are the conditions precedent to the vesting of the future interest
3. Find a measuring life
4. Will we know, with certainty, within 21 years of the death of the measuring life, if a future interest holder can take?

35

Measuring life

A person:
1. alive at the date of the conveyance
2. whose life or death is relevant to the condition's occurrence.

36

Bright-line rules of rap

1. A gift to an open class that is conditioned on the members surviving to an age beyond 21 violates the rap.
– "Bad as to one, bad as to all." If a disposition might vest too remotely for ANY member of the class, the entire class gift is void.

2. Many shifting executory interests violate the rap. An executory interest with no limit on the time within which it must vest violates the rap.
– E.g., "To A and his heirs so long as the land is used for framing, and if the land ceases to be so used, to B and his heirs."
– Strike offending future interest
– E.g., in the example above > "To A and his heirs so long as the land is used for farming."
– If grammatically incorrect, strike the entire conditional clause.

37

Charity-to-charity exception

A gift from one charity to another does not violate the rap.

38

Rap reforms

1. Wait and see, or second look doctrine (majority).
2. Uniform Statutory Rule Against Perpetuities
3. Cy pres doctrine
4. Age reduction

39

Wait and see, or second look doctrine

Rap reform effort that determines the validity of any suspect future interest on the basis of facts as they exist at the end of the measuring life.

* Embraces the cy pres doctrine and the reduction of any offensive age contingency to 21 years.

40

Uniform Statutory Rule Against Perpetuities

Codifies the common law rap and provides an alternative 90-year vesting period.

* Embraces the cy pres doctrine and the reduction of any offensive age contingency to 21 years.

41

Cy pres doctrine

"As near as possible."

If a given disposition violates the rap, a court may reform it in a way that most closely matches the grantor's intent while still complying with the rap.