Present Estates and Future Interests Flashcards
(34 cards)
Present Possessory Estates
- Fee Simple Absolute
- Defeasible Fees
- Life Estate
What thE Bar Examiners Want us to known about present possessory estaTES
- The language needed to create the estate
- distinguishing characteristics (is it DEVISABLE, is it DESCENDIBLE, is it ALIENABLE
- Which future interests is the present possessory estate capable of?
Devisable, Descendible, Alienable
DEvisable: capable of passing by will
DEscendible: capable of passing by inestacy (no will)
Alienable: Capable of transfer inter vivos (during estate holder’s lifetime)
Fee Simple Absolute
- Creation: “To A” or “To A and A’s heirs”
- Characteristics: Absolute ownership, potentially limitless duration, alienable, devisable and descendible.
- Future interests: None, A’s heirs have nothing. A has absolute ownership. **RATIONALE Because a living person does not have “heirs,” only heirs apparent. HEIRS ARE DETERMINED UPON DEATH.
**Defeasible Fees
Three kinds of fee simples with a condition attached (defeasance = forfeiture of the estate)
- Fee Simple Determinable:
(a) Created by fee simple language plus clear durational language (“To A” . . . “so long as”, “while”, “during”, “until,” etc).
(b) Terminates and automatically reverts back to the grantor upon the happening of a stated event. Alienable, devisable, and descendible. BUT always subject to the attached condition, even if transferred. If stated condition is violated, forfeiture is AUTOMATIC.
(c) Future interests: Possibility of reverter–if the condition is violated, the estate AUTOMATICALLY reverts back to the grantor (FSDPOR: Frank Sinatra Didn’t Prefer Orville Redenbacher)
- Fee Simple Subject To Condition Subsequent:
(a) Creation: Use of conditional language and explicit statement of a right to re-enter. I.e., “To A” . . . “provided that,” “on the condition that,” . . . “O reserves the right to reenter and retake.”
(b) Not automatically forfeited/terminated when the condition is triggered. But grantor has the PEROGATIVE to terminate
(c) future interest: the right of entry synonymous with the power of termination.
- Fee Simple Subject to Executory Interest:
(a) Creation: Conveyance from grantor to grantee, with a condition that if triggered cuts off the grantee’s estate and transfers the estate to a third party. “To A” . . . “but if X event occurs” . . . “then to B.”
(b) If the condition occurs, the estate is automatically forfeited in favor of a third party other than the original grantor.
(c) Future interest: “Shifting executory interest”
Note: If elements of both fee simple determinable and fee simple subject to a condition subsequent, construe in favor of fee simple subject to a condition subsequent.
Rules of Construction for a Defeasible Fee
Words of mere desire, hope, or intent don’t create a defeasible fee. Courts prefer fees simple absolute over defeasible fees simple. Language needs to be clearly making a defeasible fee.
Absolute restraints on alienation on fee simples are void because they are against public policy. E.g., “To A so long as A never attempts to sell” is VOID. The condition is stricken and A has a fee simple absolute.
Life Estates
Life estates are measured in lifetime terms (not terms of years). The original grantor conveys the estate to a life tenant.
Variation: A life estate pur autre vie measured by someone other than the grantee. “To A for the life of B”
(a) Creation: “To A for life”
(b) Features: Life tenants are subject to the doctrine of waste. Life tenants are entitled to all ordinary uses and profits from land, but cannot commit waste (voluntary, permissive, or ameliorative). A future interest holder who believes the life tenant is committing waste can sue for damages or enjoin the life tenant.
(b) Future Interest: If future interest is held by the Original grantor, O has a REVERSION. If a third party holds future interest, the third party has a REVERSION.
Doctrine of Waste
Life tenants are entitled to all ordinary uses and profits from the land. But a life tenant cannot commit waste.
Waste can be voluntary, permissive, or ameliorative. Voluntary = overt act harming value. permissive waste = neglect/failure to take reasonable action to protect the land. Ameliorative waste = unilateral overt act that enhances value.
REMEDY: A future interest holder who believes the life tenant is committing waste can sue for damages or enjoin the life tenant.
Open Mines Doctrine
The open mines doctrine is an exception to the doctrine of voluntary waste. If mining was done on the land prior to the life estate, the life tenant can continue mining IN THE MINES ALREADY OPEN.
Voluntary Waste
Voluntary waste is an overt act by the life tenant that harms the land value.
Natural resources: life tenant depleting properties natural resources is considered voluntary waste except when (1) necessary to repair/maintain land, (2) land suitable only for use of natural resources, OR (3) grantor expressly/implicitly permits use.
**The open mines doctrine is an exception to the doctrine of waste. A life tenant is not liable for voluntary waste if he uses mines on the land (1) that are currently open and (2) were being mined prior to the life estate!
Permissive Waste
A life tenant is liable for permissive waste if he neglects the land or fails to take reasonable action to protect the land.
Duties of the life tenant include: (1) preserving land and structures in reasonable state of repair, (2) paying ordinary taxes on the land (to extent of its fair rental value, or profits generated from land if land is being used for profits), (3) paying interest (but not the principal) on mortgages, AND (4) pay special assessments for public improvements of short duration.
The life tenant is NOT obligated to insure the premises for the benefit of the remainderman and is NOT responsible for damage to the land from third party tortfeasors.
Ameliorative Waste
Ameliorative waste is when the life tenant unilaterally makes changes to the land that improves the property value. The rationale is that future interest holders’ may have a reasonable expectation of the property they are getting or might have sentimental value in preserving the property.
**Modern trend: A life tenant may alter or even demolish buildings if (1) the FMV of future interest holders isn’t diminished AND EITHER (2) the future interest holders don’t object OR (iii) substantial and permanent changes to the neighborhood are depriving the property of reasonable productivity/usefulness in its current state. (E.g., the area was residential but is now 90% industrial)
Compare: Leasehold tenants remain liable for ameliorative waste even if the neighborhood was changed and the market value of the land increased.
Compare: Worthless property: If land is practically worthless in its current state, the life tenant can seek a partition sale, the proceeds of which are put in trust with income paid to the life tenant.
Renunciation of Life Estate
If a life tenant who receives a life estate by will or intestacy renounces their interest, the future interest following the life estate is accelerated and becomes immediately possessory.
Future Interests
Future interests give future interest holders the right or possibility of future possession of the estate.
A future interest is a present, legally protected right in property.
There are six categories of future interests. Three held by grantor-transferors and three held by transferees. The grantor-transfeorr future interests are the possibility of reverter, right of reentry, and reversion. The transferee’s future interests are a contingent remainder, a vested remainder, or an executory interest.
Future Interests of Grantors
- Possibility of reverter attaches to a fee simple determinable. The future interest becomes present interest automatically upon trigger of the condition.
- Right of entry / power of termination attaches to a fee simple subject to a condition subsequent. The future interest becomes a present interest when the holder reenters.
- Reversion is the estate left in a grantor who conveys less than they own (i.e., a period of time less than the infinite duration of the fee simple absolute, e.g., “O to A for life”)
Future Interests in Transferees
When a future interest is held by someone other than the grantor, it must either be a contingent remainder, a vested remainder, or an executory interest.
Remainders are future interests in third parties that can become present possession on natural expiration of preceding estate (usually a life estate or term of years on exam). *Remainders cannot cut short prior takers, so they never follow defeasible fees. They must be vested or contingent.
REMAINDERS
Remainders are future interests in third parties that can become present possession on natural expiration of preceding estate (usually a life estate or term of years on exam). Remainders must be vested or contingent.
Contingent: taker is not currently definite or is subject to a condition precedent.
Indefeasibly vested: Remainderman is certain to acquire with no strings attached.
Vested Subject to Complte Defeasance: REmainderman takes subject to a condition subsequent
Vested Subject to Open: Class of takers, at least one already qualified to take
*Remainders cannot cut short prior takers and they cannot follow a time gap in the preceding state.
Example: “To A for life, then to B.” A= life tenant. B = remainderman.
Contingent remainder:
When a grantor conveys a life estate (or term of years) to one person and gives a contingent remainder to another person, the grantor retains a reversion in the event the contingent condition isn’t satisfied before the life estate ends. A possibility of reverter arises only when the grant involves a fee simple determinable.
A remainder is contingent if:
(1) The taker is not yet born or ascertainable (I.e., you can’t determine A’s heirs until he dies) AND/OR
(2) It’s subject to an unmet condition precedent. A condition is a condition precedent if it must be satisfied before the remainderman has a right to possession.
E.g., “To A for life, then to B IF B GRADUATES FROM COLLEGE.”
Once the condition precedent has been satisfied, the contingent remainder becomes an indefeasible vested remainder. If the condition precedent hasn’t been met before the current possessory estate ends, the estate reverts back to O and B has an executory interest.
Abolished Common Law Rules on Remainder
THese common law doctrines or remainders ahve been abolished. IF you see one of these as an answer on the MBE, it is likely the wrong answer!
Destructibility of Contingent remainders: rule that contingent remainders were destroyed if they didn’t vest before termination of the preceding estate is ABOLISHED. Most states will now convert a contingent interest that didn’t vest before the end of the life estate into an executory interest.
Rule in Shelley’s Case: rule against remainders for the grantee’s heirs is ABOLISHED.
Doctrine of Worthier Title: rule that a remainder in the grantor’s heirs is invalid and becomes a reversion in the grantor is ABOLISHED.
Vested Remainders
A vested remainder is a remainder created in known taker (an existing and ascertained person) that is NOT subject to a condition precedent.
There are three types of vested remainders: (1) the indefeasibly vested remainder, (2) the vested remainder subject to total divestment, and (3) the vested remainder subject to open.
Indefeasibly Vested Remainder
Indefeasibly Vested Remainder is a vested remainder with no strings attached (that is not subject to divestment or diminution). The holder is certain to acquire the estate in the future, with no strings attached.
What if holder of an indefeasibly vested remainder dies before the life tenant? At common law, B’s future interest passes by will or intestacy statute to B’s heirs.
Vested Remainder Subject to Total Divestment
Also known as a vested remainder subject to complete defeasance.
The vested remainder subject to total divestment is vested in a known and ascertained person. However, it is subject to a condition subsequent. If that condition occurs, then the remainderman will be subject to total forfeiture.
Condition Precedent vs Condition Subsequent
Apply the comma rule:
Condition Precedent: Appears before language introducing you to the remainderman.
Condition Subsequent: Appears after language that, alone and set off with commas, creates the remainder.
E.g., O conveys to “A for life, then to B, provided however, that if B dies under 25, to C.” B has a vested remainder subject to total divestment.
Vested Remainder Subject to Open
Vested Remainder Subject to Open is created in a class of persons (e.g., children) that is certain to become possessory but is subject to diminution. That is, there is one person in the group who is qualified to take, but more people might join the class.
What is a class? A class is a group of people with a common characteristic (e.g., children, nephews). Each member gets an equal portion of the remainder. A class gift is vested subject to open if there is at least one class member, and contingent if all of the class members are unascertained.
When does the class close? We apply the rule of convenience to determine when the class closes. The rule of convenience states that a class closes when some class member calls can call for distribution of their share of the vested remainder subject to open. I.e., Once A dies, a child of B born or conceived after will not share in the gift.
Exception to rule of convenience: The Womb Rule is an exception to the rule of convenience. Under the Womb Rule, persons in gestation at the time the class closes are included in the class.
