Hatin On Dead-Hand Control

This is the first of a three-part series on Future Interests. This part deals with the application of the Rule Against Perpetuities, a real law school treat.

The Rule Against Perpetuities is a hater. It seeks to ensure that the dead cannot control their property in perpetuity. It does so by imposing a time limit (the "perpetuities period") on any conditions placed in a will or grant which creates a future interest. So, for example, if A has a future interest, that interest must vest or it must terminate within this time limit.

The difficult parts of applying the Rule are (1) figuring out the time period and (2) figuring out whether the condition expires within this time period.

THE RULE:

No future interest is valid unless it can be shown that it will necessarily vest, if at all, no later than 21 years after some life in being at the creation of the interest.

KEEP IN MIND...

"No future interest...": The Rule only applies to future interests. Moreover, it only applies to future interests which are contingent upon some condition.

"...is valid...": if a conveyance violates the Rule, that particular conveyance is void. But it doesn't necessarily mean that the whole grant is void -- only the part that violates the law is invalid.

"...necessarily vests, if at all...": this just means that the interest has to vest or terminate within the perpetuities period. Essentially, the condition, which determines whether the future interest vests, needs to have a time limit – i.e., a point in time where exactly one of the following is true: (1) the condition is met and the interest vests* or (2) the condition is not met and the interest is terminated. And this point in time has to come before the perpetuities period ends.

• If the condition X is “to B, if B graduates law school before 27” and B is 17, we know that in 10 years, we will certainly know whether or not the condition has been met.
  

• If the condition X is “to B, if Starbucks stops selling coffee” -- we don’t really know if this condition will ever be met.

*A future interest vests when it becomes "present possessory," this means that future interest holder takes actual possession of the estate. This occurs when the condition imposed by the conveyance is met.

"...later than 21 years yadda yadda.": this part establishes the perpetuities period. The interest has to vest or terminate within 21 years of the deaths of all the so-called lives in being.

THE [Very Broad] ANALYSIS:

For every conveyance in a grant, in order,** figure out the following:

• what type of future interest has been conveyed?
• does the Rule Against Perpetuities (“RAP”) applies and, if so, has it been violated?

** A single grant may have multiple conveyances. For example, take the grant "O to A for life, then to B if she has children, and if not then to C." You would assess the following conveyances in the order that the property would pass (left to right): (1) the direct conveyance to A, (2) B's future interest and then (3) C's future interest.

THE [slightly less broad] ANALYSIS:

A. Figure Out the Type of Future Interest

KEY: Is the future interest reserved in the grantor or conveyed to a grantee?

• If the future interest is reserved in the grantor…
• Step 1: Is the entire estate conveyed?
• if NO -- the grantor has a reversion. RAP does not apply.

• If YES, Step 2: is fee simple determinable conveyed?
• if YES -- grantor has a possibility of reverter. RAP does not apply.

• If NO, Step 3: Is fee simple subject to condition subsequent conveyed?
• if YES -- grantor has a right of entry. RAP does not apply.

• If the future interest is conveyed to a grantee…
• Step 1: Does the future interest cut short the preceding estate?
• YES -- executory interest. RAP applies.

• If No, Step 2: Is grantee identified?
• NO -- contingent remainder. RAP applies.

• If Yes, Step 3: Is grant conditional on something?
• YES -- contingent remainder. RAP applies.

• If No, Step 4: Is the class of recipients clearly defined?
• YES -- vested remainder. RAP does not apply
• NO -- vested remainder subject to open. RAP applies.

B. Applying The Rule Against Perpetuities

Step 1: Determine “Lives in Being”

• The "lives in being" are all people who satisfy the following two conditions:
• associated with the grant, i.e., those who stand to benefit from the grant
• alive at the time of the grant

Step 2: Determine The End of the Perpetuities Period

• The perpetuities period is the time within which the interest must vest or terminate. If the interest does not vest or terminate within this period, the Rule is violated.
• To determine the end of the perpetuities period:
• First, pretend that all the lives in being are dead.
• Then, add 21 years to when the last one died
• This point is the end of the perpetuities period: the grant has to vest before this point.

Step 3: Is the Interest Certain to Vest?

• Analysis: does a scenario exist (regardless of how improbable) where the interest vests at any point after the end of the perpetuities period (determined in Step 2)?
• if YES -- the Rule is violated and the conveyance is invalid.
• if NO -- the Rule is not violated and the grant cannot be invalidated on RAP grounds.

Step 4: Figure Out the Valid Grant

• If all the conveyances are RAP-friendly, the entire grant is valid.
• Any conveyances that violate the RAP, are invalid.

THE [in-depth] ANALYSIS:

Step 1: Determining Lives in Being

This part is actually fairly easy—the so called lives in being are all the people who are:

• associated with the grant; and
  
• alive at the time of the grant

The people associated with the grant includes EVERY person in the entire grant, not just in a specific conveyance.

• Example: O --> A for life, then B for life, and then to C and his heirs.
• Assuming that they are all alive at the time of the grant: O, A, B, and C are the lives in being.
• Example: O --> A for life, the to the children of B (B has 2 kids)
• Assuming that they are all alive at the time of the grant: O, A, B and B’s two living children are the lives in being. If B has more children, they are not lives in being, but they still stand to gain from the conveyance. This called an open class – a class of grantees that has not been completely defined.

Being alive at the time of the grant is fairly straight forward, but there is a slight twist to this calculation. There is a difference in determining the lives in being when the conveyance is by grant versus by will.

• Grant: lives in being are those alive at the time of the grant.
• Will: lives in being are those alive at the testator’s death.

This is because a conveyance occurs when a grant is made. But, if a testator puts a conveyance in her will, it won’t occur until the testator dies. The rule requires that the lives in being be alive “at the creation of the interest.”

Step 2: Determining the End of the Perpetuities Period

This step is fairly simple, but depends heavily on step 1 being accurate. So make sure you’ve found all the lives in being. Once you do, add 21 years to the death of the last life in being.

Step 3: Is the Interest Certain To Vest?

It might appear that this step doesn’t really guarantee accuracy in applying the Rule. You might think “Just because I couldn’t come up with a scenario, doesn’t mean that one couldn’t exist. Maybe I just couldn’t think up of one.” Well, I would say, “That is true, young 1L, but that is why you have to do this in a methodical manner, thereby ensuring accuracy.” In other words, this whole “coming up with a scenario” step should be done in a systematic way.

You usually don't have to worry about the lives in being violating the rule. Instead, you should figure out all the people who stand to gain from the conveyance (i.e., are associated with the grant), but weren't alive at the time the grant was made. Once you determine all the people associated with the grant, you check if the condition can expire for each of them beyond the perpetuities period.

Example: O --> A for life, then to B’s children. Assume that B has two children. B’s two children are lives in being. But the conveyance is made to all of B’s children, which, until B dies, is an open class (because B can keep having children until he’s dead***). So, if B has children after the grant, they are not lives in being, but they are associated with the conveyance, i.e., they stand to benefit from it.

In this case, the condition is an open class one – the recipients must be the children of B. This class closes as a matter of definition when B dies. Therefore, the condition expires upon B’s death. Since B is a life in being, his death occurs within the perpetuities period. Therefore, regardless of how many kids B has, the condition expires within the perpetuities period.

*** Given the Rules origins lie with a case adjudicated in the 1600s, the Rule does not account for the possibility of cryogenically frozen sperm used to create after-born lives in being...

Given that the rule is one of logical proof, your goal is to see if there is any possibility that the interest will vest after the perpetuities period is over. The point is to be as random as you can be and make arguments which are a complete stretch (e.g., 80 year olds having kids, 80 year olds marrying people that haven’t been born yet, and other fun things with octogenarians)

Practical Sidenote: conditions may not always be explicit – they may be implied by the grant. I would recommend making a short checklist of known conditions that you should look out for with each particular future interest. Or maybe I'll just make one and post it on here.

Here’s an example of how unlikely something can be and still violate the Rule (it’s also an example of the open class condition):

Hypothetical: The Unborn Widow

Grant: O --> A for life, then to A’s widow ("W") for life, then to A’s children who are then living.

Analysis for grant from A’s widow to A’s “children who are then living”

Step 1: Lives in being. A is the life in being. W, A’s widow, was not yet born at the time of the grant so she cannot be a life in being.

Step 2: The end of the perpetuities period is 21 years after the last life in being (A) dies.

Step 3: Is there chance the interest vests after the perpetuities period?

YES. Take the following factual timeline:

1. O makes the grant described above
2. W is born
3. A marries W
4. W has a kid.
5. A dies
6. 25 years pass (note: more than 21 years)
7. W dies

The grant to A’s children cannot vest until A’s widow dies because she has a life estate. The condition is that the children need to be alive when A’s widow dies (“A’s children who are then living”). We can’t tell what children are going to be “then living” until we know when the widow dies. In the above case, the widow doesn’t die till after this period. Therefore, there is a chance that it won’t vest until after the period expired.

Compare with this Grant: O-->A for life, then to A’s widow for life, then to A’s children.

Here, RAP is not violated. Because we don’t have the requirement that the children be alive when the widow dies. This is essentially a gift to the class of “A’s children.” The class has vested by the time A dies, because once he dies he can no longer have children (the Rule assumes cryogenically freezing sperm is not an option).

Step 4: Figure out the Valid Grant

If you’ve determined that a particular conveyance is valid, it doesn’t necessarily void the whole grant. Instead, you just cross out the invalid conveyance until the remaining valid conveyance(s) no longer violate the rule.

Compare the following two grants:

Grant #1

O-->A and his heirs, but if the land is not farmed, then to B and his heirs.

becomes…

O-->A and his heirs, but if the land is not farmed, then to B and his heirs.

Essentially: A gets a fee simple.

Grant #2

O-->A and his heirs as long as the land is farmed, then to B and his heirs.

becomes…

O-->A and his heirs as long as the land is farmed, then to B and his heirs.

Essentially: A has a fee simple determinable.