Property: Future Interests

Front 1

Future interests

Back 1

Retained by grantor:
Reversion, possibility of reverter, right of entry.

Given to grantee:
Remainder [vested remainder; vested remainder subject to open; contingent remainder], executory interest

Front 2

Reversion

Back 2

1. Kept by grantor when grantor gives any estate of a lesser duration than durational estate grantor had
2. Age of parties is almost always irrelevant.
3. Reversion may or may not go back to O depending on circumstances set in the grant.
4. Never subject to RAP.
5. Can be transferred freely.
6. Grantor can’t keep reversion if he has given away full interest (and has no chance to get property back)

Front 3

Possibility of reverter.

Back 3

1. Grantor retains this possibility, ONLY with a fee simple determinable:
fee simple determinable ends automatically when condition happens

2. Never subject to RAP, and is freely transferable

3. Key language: O to A for “so long as,”/ while/ during/ until XYZ.

Front 4

Right of entry (power of termination)

[Fee simple on a condition subsequent; retained by grantor and must be expressly reserved]

Back 4

1) Grantor must exercise the right of reentry.

2) If language gives to Grantee with a condition introduced by “provided however” and gives O the right to “go and retake” the property, it is a fee simple on a condition subsequent.

3) Other possible language: “but if”/ “upon condition that”

2. Not subject to RAP, but can’t be transferred inter vivos (by will or by intestate succession at death is OK).

3. Language “for the purpose of”- has no effect on title.

Front 5

Vested remainder vs. vested remainder subject to open

Back 5

Vested Remainder: nothing stands in the way of its becoming possessory on the expiration of the estate before it; we know who will take and there are no conditions to taking

VR Subject to Open (Partial divestment): remainder interest is to a class whose members are not yet fully known; class remains open

Front 6

Contingent remainder

Back 6

Something has to happen or be known before remainder can become possessory:

1) If a condition must be satisfied before grantee can be certain of possession

2) If at time of grant, grantee is not in existence (contingent on birth)

3) If you can’t identify, by name, the person who holds the remainder, it’s contingent until you can identify the taker

Front 7

Executory interest

Back 7

1) Operates to cut short the estate before it

2) If a future interest in a grantee is not a remainder, MUST be executory interest

3) Read the estates in order; see if a contingency is a part of first estate given to a grantee, or a part of the second

4) Vested remainder subject to an executor interest--> vested remainder subject to total divestment or a vested remainder subject to an executory limitation

5) Holder of an executory interest can’t sue LT for waste

6) Shifting: if executory interest operates by taking title from one grantee and giving it to another
* If operates by taking title from grantor and giving to a grantee, it’s springing

Front 8

Rule Against Perpetuities (RAP)

Back 8

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

If there is any chance that interest might vest outside of a life-in-being + 21 years, interest is void

Look at facts. Ask “Could everyone alive at that time of the grant die, and 21 years pass, before the interest might vest?” If so, void.

Front 9

What interests do RAP apply to?

Back 9

Contingent remainders, executory interests, vested remainders subject to open

Front 10

When is the validity of a grant determined?

Back 10

At the time of creation.

Doesn’t matter if interest actually does vest within the time period of RAP (don’t “wait and see” what actually happens).

Front 11

Perpetuity saving clause

Back 11

Saves a grant from being voided by RAP by making sure vesting must occur within 21 years after the death of the survivor of A or B, then title shall pass to B and his heirs.

Front 12

Do options and rights of first refusal violate RAP?

Back 12

Yes, if they could be exercised outside the time period.

Front 13

What is the charity exception to RAP?

Back 13

No violation of RAP if gift is over from one charity to another.

Front 14

RAP problem: Age contingency in an open class

Back 14

1) Watch for facts where class is open and gift over is contingent on a class member reaching a certain age

2) Fertile octogenarians: Anyone, regardless of age, capable of having children for RAP

3) If RAP voids gift over to any member of class because of possibility that interest might vest outside the time period, then all class members lose- even those who satisfy condition and are vested (“Bad as to one, bad as to all.”)

Front 15

RAP Problem: Unborn spouse

Watch for a gift over following a widow or widower’s life estate, where the gift cannot vest until the widow/widower dies

**For unborn spouse situation to arise, grant must be written so the vesting cannot occur until widow/widower dies

Back 15

1) Hypo: O to A for life, then to A’s widow for life, then to A’s children who are then living. Intended estates?

A: life estate
A’s widow: contingent remainder for life (contingent on identification) → RAP does not void because when A dies, we will know who A’s widow is
A’s children: contingent remainder on surviving widow→ RAP voids. At time of A’s grant, woman who will turn out to be A’s widow may not be born yet, so vesting to A’s descendants could come outside the time period and doesn’t make any difference whether A is married at time of grant

**Vesting: when takers are known and there is no condition that might keep them from taking

** If transfer is via will, look at situation as time of T’s death; if via deed, look at situation at time of deed