Real Property - Future Interests

Front 1

Future interests creatable in the grantor: 3 types

Back 1

1. Possibility of Reverter (from fee simple determinable)

2. The Right of Entry (aka power of termination) (from fee simple subject to a condition subsequent)

3. Reversion (from life estate or leasehold interest)

Front 2

Future interests creatable in transferee: 2 main types (each of which has two subtypes)

Back 2

1. Remainder (contingent or vested)

2. Executory interest (shifting or springing)

Front 3

Vested remainder: 3 sub-types

Back 3

1. Indefeasibly vested remainder: holder is certain to acquire an estate in the future with no strings attached. Example: "To A for life, then to B."

2. Vested remainder subject to complete defeasance/total divestment: holder's right to possession could be cut short because of a condition subsequent. Example: "To A for life, remainder to B, provided, however, that if B dies under the age of 25, then to C." A is alive, B is 20 years old. A has a life estate, B has a vested remainder subject to complete defeasance, C has a shifting executory interest, and O has a remainder.

3. Vested remainder subject to open: a remainder is vested in a group of takers, at least one of whom is qualified to take; however, each member's share is subject to partial diminution because additional members can still join the class. Example: "To A for life, then to B's children"; B has two children, who have a vested remainder subject to open.

Front 4

Executory interest: 2 sub-types

Back 4

1. Shifting executory interest--if it comes from after the end of another transferee's estate

2. Springing executory interest--if it comes after the end of the grantor's estate

Front 5

Remainder

Back 5

A future interest created in a grantee that is capable of becoming possessory upon the expiration of a prior possessory estate created in the same conveyance in which the remainder is created (pretty much just after a life estate or leasehold for years).

Remainders are sociable, patient, and polite:
(i) Sociable: never travels alone, always accompanies a preceding estate of known, fixed duration, usually a life estate or term of years.
(ii) Patient: never follows a defeasible fee, waits for previous interest to end.
(iii) Polite: never cuts short or divests a prior transferee.

Front 6

Vested vs. contingent remainders

Back 6

A remainder is vested if it is BOTH (i) created in an ascertained person AND is not subject to any condition precedent.

Contingent remainders are all others. E.g., "To A for life, then to B's children who survive A" or "To A for life, then, if B graduates from college, to B."

For contingent remainders, O has a reversion in case the contingent remainder never vests!

Front 7

Rule of destructibility

Back 7

At common law (which hated contingent remainders), a CR was destroyed if it was still contingent at the time the preceding estate ended.

Example: "To A for life, and if B has reached the age of 21, to B." Now A has died, leaving behind B who is still only 19. At common law, B's CR was destroyed so O or O's heirs would take in fee simple absolute.

Today, though, the rule of destructibility has been abolished, so in the above example O or O's heirs would hold the estate subject to B's springing executory interest; once B turns 21, she takes.

Front 8

Rule in Shelley's case

Back 8

At common law, the rule would apply in one setting only: "To A for life, then, on A's death, to A's heirs." A is _still alive_.

Historically, the present and future interests would merge, giving A a fee simple absolute.

NB: this was a rule of law, not a rule of construction, so it applied even in the face of grantor's contrary intent.

Today, the rule in Shelley's case has been abolished and A would have a life estate, A's heirs would have a contingent remainder, and O would have a reversion (in case A died w/o heirs).

Front 9

Doctrine of worthier title (aka rule against a remainder in grantor's heirs)

Back 9

Applies when O, who is alive today, tries to create a future interest in his heirs. Example: "To A for life, then to O's heirs."

If the DoWT did not apply, A would have a life estate and O's heirs would have a contingent remainder (since a living person has no heirs).

Instead, the DoWT says that the remainder in O's heirs is void, thus A has a life estate and O has a reversion. This doctrine promotes the free transfer of land because it allows O and A to later team up, combine their interests, and sell the property in fee simple to a third party.

NB: this is a rule of construction, not a rule of law, so grantor's intent controls--if grantor REALLY makes clear that he intends to create a contingent remainder in her heirs, then that intent is honored.

Front 10

Open vs. closed classes

Back 10

Open classes: members can still join.

Closed classes: nobody else can join anymore.

You'll know a class is closed when any member can demand possession.

Front 11

Executory interest vs. remainders

Back 11

Executory interests are ones created in a transferee which is not a remainder and takes effect by cutting short some interest in either another transferee (shifting) or in the grantor (springing).

Front 12

Shifting executory interest

Back 12

Cuts short another transferee's estate.

Examples: "To A and her heirs, but if B returns from Canada sometime next year, to B and his heirs" or "To A, but if A uses the land for nonresidential purposes at any time during the next 20 years, then to B."

Front 13

Springing executory interest

Back 13

Cuts short the grantor's estate.

Examples: "To A, if and when he marries" or "To A, if and when he becomes a lawyer."

(O has a fee simple subject to A's springing executory interest.)