Rule Against Perpetuities PDF

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Outline on perpetuities...

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Rule Against Perpetuities Definition: No interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. Purpose: The compromise this rule strikes is that property may be tied up with contingent interests for lives in being plus 21 years thereafter, but not longer. a. Mechanics of the Rule: RAP applies to individual interests within a conveyance, NOT to the conveyance as a whole i. Step 1: Determine whether the future interest in question is even subject to the Rule, which applies only to interests that are not vested at the time of the conveyance that creates them 1. Only 3 interests are subject to the rule: a. (1) contingent remainders [bc not vested interest] b. (2) executory interests [bc not vested interest]; and c. (3) Vested remainders subject to open (class gifts) ii. Step 2: Determine whether the given interest might not vest within the perpetuity period of “lives in being plus 21 years.” 1. You must prove that a contingent interest is certain to vest or terminate no later than 21 years after the death of some person alive at the creation of the interest. a. The rule makes clear that the interest has to be set up so it MUST vest (if at all) within the perpetuities period. b. If you cannot prove that, then the contingent interest is void from the outset c. If you find this person, they are called the validating life i. Anyone alive at the time of conveyance (time the interest is created) can serve as a measuring/relevant life. This includes 1. The person holding the interest 2. The person creating the interest 3. Any person who can affect a condition precedent attached to the interest, and 4. any person who can affect the identity of the holder ii. The period is measured by the lifetime of that person plus 21 additional years after that person dies

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1. To be valid, the contingent future interest must terminate or become vested within that period. 2. We do not wait and see - we use only the information we have at the time the instrument becomes effective. Rule of thumb: pick lives of those who have control over the interest.

b. Analytical Approach i. Identify relevant interests ii. Select a salient measuring life iii. Determine when the interest must vest or fail iv. Apply the RAP v. Eliminate invalid interests c. RAP Traps and Tricks i. Most common violations of RAP relate to gifts that vest when children reach a certain age 1. “O to A’s children who reach the age of 25.” ii. Fertile octogenarians and precocious toddlers 1. The RAP assumes that someone could always have a child, despite their age. iii. Shifting executory interest following fee simple subject to executory limitation 1. “O to A unless the land is used for a school, then to B.” iv. Springing executory interest where the condition precedent may never happen 1. “O to A upon completion of the new subway line.” v. Unborn widow trap 1. “O to A for life, then to A’s widow for life, then to A’s widow’s children.” A is married to B but they have no children at the time of conveyance. B has a child from a preexisting marriage. a. We do not know who A’s widow is until A’s death. Therefore, B is an unascertained person and cannot be a relevant/measuring life. vi. Group gift where some members are vested 1. “O to A for life, then to A’s children.” A is alive and has one child at the time of conveyance. a. The class gift is subject to future executory interest in unborn children that may violate the RAP. b. So there’s a vested interest in currently alive children, and invalid unvested interests in unborn siblings.

2. This issue leads to the Rule of Convenience d. Rule of Convenience 1. Prevents divesting of *some* vested remainders subject to open 2. Class interest closes either a. Naturally, usually on death (e.g., “O to B for life, then to A’s children”); OR b. As soon as estate preceding future interest expires and existing members of the class are entitled to take possession (e.g., “O to A for life, then to B’s children”) 3. Implications: a. If a gift is to an open class, but some members may vest too remotely, it would normally be invalid as to all class members. b. Consider this i. “O to A for life, then to B’s children who reach 30.” B is alive and has one child C who is 31 and another D who is 2. ii. Who is a validating life? 1. B is not. He could die, and D would not reach 30 within 21 years after B’s death. 2. A, though, is - thanks to the Rule of Convenience! All future members of the class “B’s children” will either vest or fail upon his death. a. A thus validates the otherwise invalid future interests created by the class gift. e. RAP and Charities i. The RAP does not apply to gifts to charities, BUT ONLY IF the possessory interest and the RAP-vulnerable interest are both to charitable foundations 1. “O to the Red Cross unless they provide services to Albania, in which case to Doctors without Borders.” a. RAP does not apply 2. “O to A, but if A or any of his offspring ever smoke, to Doctors without Borders.” a. RAP applies. f. Wills and the RAP i. The moment of conveyance in a will’s context is taken to be the moment that the will becomes effective - i.e., the testator’s death.

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A will states, “T gives his land to A for life, then to B’s children who survive T.” 1. The conveyance is analyzed at the moment of T’s death, but the interests do not change. 2. If T outlives A, the life estate is still considered as one to A for life (even though this may not actually effect any possessory interest in A)....