Gilbert Law Summaries on Future Interests and Perpetuities
Author:
Gilbert Staff
Edition:
5th
Copyright Date:
2009
15 chapters
have results for future interests and perpetuities
Gilbert Exam Strategies 9 results (showing 5 best matches)
- Future Interests, and particularly the Rule Against Perpetuities, has quite a reputation for difficulty. And it is probably deserved. Future Interests requires you to think and analyze in an unfamiliar way. You must look carefully at the used in a deed or will, and these words as creating one of several future interests. Paying attention to each precise word of an instrument is something you are probably not accustomed to doing, but it is a practice that will not only help you on your exams, but will also be useful in reading all kinds of documents.
- Rule Against Perpetuities
- The aim of this Summary is to teach you how to classify Future Interests correctly and how to apply the applicable rules, including the Rule Against Perpetuities. We emphasize the fundamental ideas, which are essentially simple and can be expressed in language comprehensible to any student. These should not be hard to grasp once you catch on to what we are doing: looking closely at the words of an instrument, making future interests out of these words, and applying rules governing the future interests. Once you catch on, you may find the subject expands your mind in all kinds of challenging ways. Like mathematics, Future Interests has a strong appeal to people who like to do puzzles.
- Once you have carefully read a deed or will and determined what kind of future interest, if any, is created, you must determine what rules are applicable to that particular future interest. There are six types of future interests—
- One important way in which a Future Interests problem differs from a puzzle, however, is its starting point. Most puzzles can be started from any point, but a Future Interests problem must be attacked in order, with each step building on the one preceding it. Therefore, when confronted with an exam question with possible Future Interests aspects, you should take the following steps to solve the puzzle:
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Chapter Two: (Almost) Obsolete Rules Restricting Remainders 64 results (showing 5 best matches)
- Although future interests have been permitted for hundreds of years, judges have always been jealous of them. When created in land, they make land less alienable. They also extend the power of the “dead hand.” Contingent future interests have been thought to be more objectionable than vested future interests because they may be more difficult both to transfer and to value. Judges therefore laid down a number of rules to curb contingent future interests. Among these rules were the doctrine of destructibility of contingent remainders, the Rule in Shelley’s Case, and the Doctrine of Worthier Title. The first two of these rules have been abolished in almost all states. Another restrictive rule is the Rule Against Perpetuities, discussed in Chapter Six.
- When an inter vivos conveyance purports to create a future interest in the , the future interest is and the grantor has
- Rule Against Perpetuities
- Executory interests are indestructible because no gap in seisin can ever precede these interests. In the case of a shifting executory interest, this interest shifts seisin away from a prior vested interest in a grantee prior to its termination. By definition, no gap in seisin occurs. The executory interest simply grabs seisin “to A and his heirs, but if B returns from Rome, to B and his heirs”). In the case of a springing executory interest, it always shifts seisin out of the grantor in the future ( “to A and her heirs when she marries B”). [
- Once you have classified the present and future interests in a conveyance, the next step is to determine whether any of the interests is invalid. Common law judges developed technical rules that destroyed certain contingent interests that were disfavored because they tended to make land less alienable. Although abolished in many jurisdictions today, these rules should be considered when the question indicates that the jurisdiction
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Chapter Six: The Rule Against Perpetuities 192 results (showing 5 best matches)
- Gifts in default of appointment may be destroyed by the donee exercising the power. Future interests that may be destroyed at any time by one person making the property her own (appointing the property to herself) do not violate the policy against perpetuities. Hence, the perpetuities period begins to run only when the general inter vivos power ceases.
- Your approach to ascertaining whether a future interest is void under the Rule Against Perpetuities should follow these important steps:
- The Rule Against Perpetuities has been abolished (at least with respect to future interests in trust) in a growing number of states. [
- . If the class will surely close within the perpetuities period, you have tentatively validated the interest and can proceed to ask the second major question. If the class will not necessarily close within the perpetuities period, the gift is void and there is no need to ask the second major question.
- Recall from Chapter Two that, after initially classifying the interests in a conveyance, you may need to reclassify them after applying the common law rules restricting , and the
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Title Page 2 results
Summary of Contents 19 results (showing 5 best matches)
Chapter One: Classification of Future Interests 198 results (showing 5 best matches)
- A future interest is an interest in property that is not now, but in the future may become, possessory. A future interest is a
- Future interests can be divided into two groups, those retained by a grantor and those created in a grantee. If the future interest is retained by the , the future interest . A remainder or an executory interest can never be retained by the grantor, nor may a reversion, possibility of reverter, or right of entry be created in a grantee. Each future interest in the transferor is briefly described below and discussed in detail later. Future interests retained by the grantor are collectively called reversionary interests.
- There are five, and only five, future interests permitted: , and
- An executory interest is a future interest in a grantee that, in order to become possessory, must of the grantor at a future date. The basic difference between a remainder and an executory interest is that a remainder never divests the prior estate, whereas an executory interest can divest the preceding interest. (
- Modern statutes often include executory interests in an all-inclusive definition of a remainder, abolishing executory interests as a separate category of future interests. New York Estates, Powers & Trusts Law section 6-4.3, for example, defines the term “remainder” as a future estate “created in favor of a person other than the creator.” Thus, all future interests in grantees are remainders, and the historical distinctions between remainders and executory interests are obliterated in New York.
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Chapter Three: Rights and Liabilities of Owners of Future Interests 61 results (showing 5 best matches)
- Reversions, remainders, and executory interests are descendible in the same manner as possessory interests. Future interests in land descend to the owner’s heirs. Future interests in personal property are distributed to the owner’s next of kin. Of course, any future interest contingent upon the owner’s surviving to the time of possession is not descendible. Reversions, remainders, and executory interests are devisable on the principle that whatever is descendible is devisable.
- If a person owning a future interest makes a gift of it, such gift is subject to federal gift taxation. The future interest may not be transmissible at death, and hence excluded from taxation at death. If it is given away during life, however, it is subject to gift tax. It is valued as all future interests are valued, as illustrated above.
- Never create a future interest transmissible at death.
- A few states still follow the old common law view that contingent interests are inalienable, subject to the three exceptions noted above. These states apparently include Arkansas, Colorado, Illinois, Maine, and possibly others. In a few states ( Maryland, New Jersey), future interests contingent as to “event” are assignable inter vivos, but future interests contingent as to “person” are not. [T.P. Gallanis,
- When a testator bequeaths personal property to a legatee and creates a future interest in it, the possessory owner may be able to destroy the personal property or transfer it to a bona fide purchaser, destroying the future interest. To protect the future interest, some states have enacted statutes that treat the possessory owner ( 20 Pa. Cons. Stat. Ann. §6113; Rest. §202] As trustee, the possessory owner is entitled to all income derived from the property but must preserve the property for the holder of the future interest. Other states require the possessory owner of personalty to account periodically to a court as if she were a trustee. [
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Capsule Summary 162 results (showing 5 best matches)
- Where an inter vivos conveyance purports to create a future interest , the future interest is and the grantor has a
- Under the Rule Against Perpetuities, an executory interest following a fee simple determinable or divesting a fee simple cannot vest in interest before it becomes a possessory estate.
- The Uniform Statutory Rule Against Perpetuities (“USRAP”), adopted in nearly half the states, waits for 90 years before declaring an interest invalid. If an invalid interest has not vested within 90 years, it is then reformed to carry out the grantor’s intent.
- The value of any future interest transmissible by the owner is included in the gross estate. Transmissibility is the key to taxation, not whether the interest is vested or contingent. This is the reason for the estate planning precept that one should never create a future interest transmissible at death (unless attached to a special power of appointment;
- Under the Federal Bankruptcy Act, creditors can reach all legal and equitable interests of the debtor in property. Thus, the bankrupt’s estate includes all vested and contingent future interests, regardless of their alienability under local law.
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Glossary of Terms 17 results (showing 5 best matches)
- executory interest
- vested interest
- validating life (for the Rule Against Perpetuities)
- —A future interest in a grantee that can become possessory upon the expiration of the prior estate and cannot divest any interest in a grantee. It is to be distinguished from an executory interest, which cuts short the prior estate before the time fixed for its natural termination.
- —A vested remainder certain to become possessory in the future.
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Chapter Five: Powers of Appointment 66 results (showing 5 best matches)
- A power of appointment is the authority conferred by a property owner on another to select the person or persons who will receive a future interest in the property. Powers of appointment thus allow the property owner to delegate someone else to deal flexibly with changing circumstances in the future— , births, marriages, deaths, and changes in the law.
- A is the donee of a general testamentary power over a $25,000 trust. A also owns outright $25,000. A’s will provides: “I give all my property and all property over which I have a power of appointment as follows: (i) $15,000 to B; (ii) $10,000 to C’s children who reach age 25; and (iii) all the rest to D. B predeceases A, leaving no descendants. At A’s death, C has two children, ages 10 and 12. Because the gift to B lapses (and is not saved by an anti-lapse statute) and the gift to C’s children violates the Rule Against Perpetuities, the appointments are ineffective. The property is captured in A’s estate and D takes everything.
- Same facts as above, except the gift in default of appointment is “to A’s issue who reach age 25.” A dies, survived by a child, D, age three. Because the gift in default violates the Rule Against Perpetuities, the appointive property is captured in A’s estate—even though A’s purported exercise of the power was not contained in a blending clause—and Charity takes everything.
- The power is usually ineffectively exercised because the appointment violates the Rule Against Perpetuities or the appointment is to a person then dead.
- A general power of appointment may be exercised by appointing a limited interest in the property, such as a life estate, to another. The donee may appoint in further trust or impose conditions. Because the donee may appoint to herself (or to her estate) and by a second instrument (or second clause in her will) transfer the property as she pleases, there is no reason to say she may not create a limited interest by a direct appointment. The donee may also create new powers of appointment in others. [Rest. 3d §19.13; Rest. 2d §§19.1, 19.2]
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Exam Questions and Answers 38 results (showing 5 best matches)
- Joe will claim that Oralee held the possibility of reverter or right of entry at death, and that it was devised to him. These reversionary interests are devisable. If Oralee held the future interest at death, Joe holds it now by devise.
- The Doctrine has been abolished in a number of states, but it is applied in some. It is hard to predict how a court will rule on whether the presumption of a reversion is overcome by a contrary intent. Extrinsic factors will likely influence the court. If the court applies the Doctrine, Oscar has the power to revoke the trust because he has all interests in it. The settlor can revoke a trust when no one else has an equitable interest in it. If the Doctrine applies, the appointment by Oscar is valid because the perpetuities period starts running at Oscar’s death, when the power to revoke ceases. If the appointment is valid, the trust fund and $10,000 of Oscar’s own property will go to Sam for life, remainder to Sam’s children; $300,000 goes to Betty.
- Oscar’s probate estate consists of $310,000 after debts and taxes. Who takes the trust fund (still worth $200,000) at Oscar’s death? How is Oscar’s estate distributed? The jurisdiction follows the common law Rule Against Perpetuities, and has not adopted wait-and-see or cy pres.
- trust, the gift to Sam’s children is valid. Where a trust is revocable by one person, the property is not tied up and the perpetuities period does not begin to run until the power to revoke ceases (at Oscar’s death).
- The first issue is who owns the future interest. The deed to the Booneville School Board is ambiguous. The words “so long as it is used for school purposes” indicate that the Board was given a fee simple determinable, in which case Oralee would retain a possibility of reverter. The words “and if it ceases to be used for school purposes, Oralee, her heirs, and assigns have a right to reenter,” indicate that Oralee is retaining a right of entry, in which case the Board would take a fee simple subject to a condition subsequent and not a determinable fee. It is impossible to have a determinable fee with right of entry, which is what this deed apparently intended. There is a preference for the right of entry rather than the possibility of reverter because the right of entry is optional rather than automatic. However, a complete answer would argue both ways. Thus, this answer will make alternative assumptions: (i) that Oralee retained a possibility of reverter, and (ii) that Oralee...
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Chapter Four: Construction of Instruments 101 results (showing 5 best matches)
- invents a whole new future interests vocabulary to determine which alternative future interests will be given effect under a variety of circumstances. Its complexities cannot be summarized here. They are explained in six pages of closely analytical reasoning in the Official Comments. Because section 2-707 upends the law of remainders, creating a new body of law for lawyers to master for the future and leaving the old law applicable to existing instruments, it may not be popular with lawyers. In fact, only about 10 states have enacted section 2-707.
- In 1990, the Uniform Probate Code (“UPC”) was amended to effect a revolutionary change in the law of future interests. Section 2-707 provides that, unless the trust instrument provides otherwise, , all future interests are contingent on the beneficiary’s surviving the distribution date. The common law’s ancient preference for vested interests is reversed. , if the remainderman does not survive the distribution date, a substitute gift is created in the remainderman’s then surviving descendants. If the remainderman has no surviving descendants, the remainder fails, and the property passes on the life tenant’s death to the testator’s residuary devisees or heirs.
- The stated reason for making all future interests in trusts contingent upon survivorship is to avoid the cost of having such interests pass through the owners’ probate estates. (
- The basic rule is that if there are no express words requiring the taker of a future interest to survive to the time of possession, none will be implied. This owes something to the preference for vested interests and something to the belief that the rule carries out the average transferor’s intent. [
- and applying it to all trust remainders and not just to remainders given the testator’s kindred. [UPC §2-707] This section applies to reversions as well as to remainders in trust, but not to legal future interests.
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Index 79 results (showing 5 best matches)
Copyright Page 1 result
- Copyright © 2009 by Thomson/West. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without permission in writing from the publisher. Printed in the United States of America.
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- Publication Date: November 3rd, 2009
- ISBN: 9780314181169
- Subject: Trusts and Estates
- Series: Gilbert Law Summaries
- Type: Outlines
- Description: The topics included in this outline are reversions, possibilities of reverter, rights of entry, remainders, executory interests, and rules restricting remainders and executory interest. Also discussed are rights of owners of future interests, construction of instruments, powers of appointment, and the rule against perpetuities, including reforms of the rule.