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17 Cards in this Set
- Front
- Back
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PROPERTY - FUTURE INTERESTS
What Is a Future Interest? |
A future interest is a nonpossessory interest that will—or may—become a possessory estate in the future.
For example, if O conveys land “to A for life,” O retains a future interest to retake possession when O dies. |
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PROPERTY - FUTURE INTERESTS
Types of Future Interests |
Five basic types:
1)reversion 2)possibility of reverter 3)right of entry 4)remainder 5)executory interest |
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PROPERTY - FUTURE INTERESTS
Reversion |
When an owner conveys a vested estate smaller than the estate he owns, he retains a future interest called a reversion.
For instance, if O holds fee simple absolute, but conveys merely a life estate to A, O retains a reversion. |
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PROPERTY - FUTURE INTERESTS
Possibility of Reverter |
When a transferor creates a fee simple determinable, the future interest retained is a possibility of reverter.
For example, if O conveys land “to L for so long as used as an orphanage,” O retains a possibility of reverter. |
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PROPERTY - FUTURE INTERESTS
Right of Entry |
The right of entry arises when a transferor creates a fee simple subject to a condition subsequent (e.g., O conveys “to L, but if L fails to use the property as an orphanage, then O may enter and retake possession”).
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PROPERTY - FUTURE INTERESTS
Remainders |
A remainder is a future interest created in a transferee that is capable of becoming possessory upon the natural termination of a prior estate created by the same instrument.
For example, if A conveys “to B for life, and then to C,” C’s interest is capable of becoming possessory when the prior estate (B’s life estate) naturally terminates; C holds a remainder. |
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PROPERTY - FUTURE INTERESTS
Vested Remainders The three types of vested remainders are: |
the indefeasibly vested remainder; the vested remainder subject to divestment; and the vested remainder subject to open.
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PROPERTY - FUTURE INTERESTS
Contingent Remainders |
The contingent remainder, in contrast, is either (a) created in an unascertainable person or (b) subject to a condition precedent. For example, suppose A conveys “to B for life, and then to C if C graduates from law school.” C’s remainder is contingent because she must first satisfy a condition precedent (graduating from law school) before she is eligible to take possession following B’s death.
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PROPERTY - FUTURE INTERESTS
Executory Interests |
An executory interest is a future interest created in a transferee that must “cut short” or “divest” another estate or interest in order to become a possessory estate.
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PROPERTY - FUTURE INTERESTS
Types of Executory Interests |
It is traditional to distinguish between the shifting executory interest (one that divests the transferee) and the springing executory interest (one that divests the transferor). However, this distinction has no legal significance.
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PROPERTY - FUTURE INTERESTS
Four Special Restrictions on Contingent Future Interests Held by Transferees |
Rule Against Perpetuities
Doctrine of Worthier Title Rule in Shelley’s Case Destructibility of contingent remainders. |
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PROPERTY - FUTURE INTERESTS
The Rule Against Perpetuities: At Common Law |
“No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.”
To comply with the Rule, it must be logically provable that within the specified period a covered contingent interest will either vest (that is, change into a vested interest or present estate) or forever fail to vest (that is, never vest after the period ends), based only on facts existing when the future interest becomes effective. |
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PROPERTY - FUTURE INTERESTS
The Rule Against Perpetuities: At Common Law (Application of the Rule) |
Assume O conveys “to A for life, then to the first child of A to reach age 30.”
Assume that A is alive when the conveyance takes effect, but that A has never had children. A potential unborn child (A’s first child to reach age 30) receives a contingent remainder under this language, which is a type of interest subject to the Rule. It cannot be logically proven that this interest is valid. For instance, A might have a child, B, one year after the conveyance; suppose O and A then die. Twenty-nine years later, if B survives, her contingent remainder will “vest” by becoming a present estate. B’s interest is deemed invalid under the Rule—at the time of O’s conveyance—because such vesting would come too late (more than 21 years after O and A, the lives in being, died). |
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PROPERTY - FUTURE INTERESTS
The Rule Against Perpetuities: At Common Law (Modern Reforms) |
Most states have modified the common law Rule by: (1) adopting a “wait and see” approach (that is, waiting until the end of the relevant period to see if the interest in fact vested or forever failed to vest); and/or (2) permitting reformation to validate the interest if consistent with the transferor’s intent.
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PROPERTY - FUTURE INTERESTS
The Doctrine of Worthier Title |
Traditionally, if an owner transferred real property to one party, and by the same instrument transferred the following remainder or executory interest to the owner’s heirs, then, under this doctrine, the owner received a reversion and the “heirs” received nothing. Today the doctrine is virtually obsolete in the United States.
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PROPERTY - FUTURE INTERESTS
The Rule in Shelley’s Case |
Under this rule, if a deed or will (1) created a life estate or fee tail in real property in one person and (2) also created a remainder in fee simple in that person’s heirs, and (3) the estate and remainder were both legal or both equitable, then the future interest belonged to that person, not the person’s “heirs.” This rule has been abolished in all but two states.
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PROPERTY - FUTURE INTERESTS
The Destructibility of Contingent Remainders |
At common law, a legal contingent remainder in real property was extinguished if it failed to vest when the preceding freehold estate ended. Today almost all states have abandoned this doctrine.
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