Future Interests Cont d The Rule Against Perpetuities (RAP)

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Gary Bradford
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1 Future Interests Cont d The Rule Against Perpetuities The Rule Against Perpetuities You must prove that the contingent interest will necessarily vest or fail within 21 years after some life in being at the time of the creation of the contingent interest. 1

2 The Rule Against Perpetuities It is not necessary for it to vest, but it must not be able to vest too remotely, even if the chance of this happening is very unlikely and, in some cases, even considered to be medically impossible. The Rule Against Perpetuities Exemptions Future interests in transferors are exempted from the Rule. Also exempt are gifts that involve charities as holders of the all the present and future interests. See note 20, p

3 The Rule Against Perpetuities Life in Being If the contingent interest is created by will, then this person must be alive at testator s death. If the contingent interest is created by an irrevocable inter vivos transfer, this person must be alive at the time of the transfer. The Rule Against Perpetuities Validating or Measuring Life The person who allows you to prove that the contingent interest is certain to vest or fail no later than 21 years after the death of a life in being. These include preceding life tenants, takers of the contingent interest, anyone who can affect the identity of the takers (such as A in the case of a gift to A s children), and anyone who can affect a condition precedent. 3

4 Jee v. Audley, 1 Cox 324, 29 Eng. Rep (1787), Casebook, p Edward s will bequeathed the interest on 1,000 to his wife for life, with the remainder unto my niece Mary Hall and the issue of her body..., and in default of such issue [when all her descendants depart from the earth]... to the daughters then living of.... John and Elizabeth Jee. p. 306 (emphasis added). Interests Created By The Will Edward s wife has a life estate. Mary has a fee simple, subject to a shifting executory interest if Mary dies without issue. The future (executory) interest lies in the daughters then living of John and Elizabeth Jee. Mary Hall Jee Daughters 4

5 Does the Contingent/Executory Interest Violate the Rule Against Perpetuities? Lives in being? At Edward s death Validating or measuring life? Indefinite Failure of Issue John and Elizabeth Jee might have children born ten years after the testator s death and then Mary Hall might die without issue 50 years afterwards, in which case it would evidently transgress the rules prescribed. p. 308 (emphasis added). 5

6 Indefinite Failure of Issue Cont d Mary is not the validating life. Mary Hall will die without issue when Mary is dead and there is no issue of Mary alive on the face of the earth, which could occur at her death, or hundreds of years after her death, or never! Remote Vesting Scenario After Edward s death, 1. Mary might give birth to a child, named Faith. 2. John and Elizabeth might have a fifth daughter named Hope (an after-born child). 3. All the relevant persons who were alive at Edward s death (Mary, John, Elizabeth, and the 4 daughters) might die in a catastrophe. 6

7 Remote Vesting Scenario Cont d 4. More than 21 years after the death of the relevant lives in being, Mary s daughter Faith dies childless, survived by Hope Jee. 5. At that point Mary would die without issue and the fund would vest in Hope, who was not a life in being (not alive at testator, Edward s death). Significance of Case Rigid Construction default of such issue general/indefinite failure of issue definite failure of issue then living 7

8 Significance of Case Cont d What-Might-Happen Approach Fertile Octogenarian Class Gifts 8

Defeasible Estates Continued Future Interests

Defeasible Estates Continued Future Interests Ink v. City of Canton, 212 N.E.2d 574 (Ohio 1965), Casebook p. 257 Condemnation of a Determinable Fee The granting clause conveyed the land to the city for