Tackling the most important topics of law school, Part 2: The rule against perpetuities

August 8, 2013

Law School 101a(Editor’s note: Over the next ten weeks, we’ll be covering some of the most prominent legal concepts taught in law school to help students faced with these topics, whether for the first time or as part of a review, better comprehend them.)

Property law is home to some of the most complicated legal concepts studied in law school.

But no property law – indeed, perhaps no other concept studied in law school – is more complicated or dreaded by law students than the rule against perpetuities, or the “RAP.”

The actual rule is succinct enough:

No interest is good unless it must vest, if at all, no later than 21 years after some life in being at the creation of the interest.

Of course, that sentence is loaded with complex and often hidden meanings that make fully understanding the rule troublesome for most law students and lawyers.

So let’s start by breaking down the text of the rule.

Interest

“Interest” refers to a property interest, such as a fee simple or life estate.  However, the RAP doesn’t apply to such simple interests as these, since they normally vest immediately (we’ll get into that later).

Rather, there is a certain kind of interest to which the RAP applies: future interests.  The most notable of these are “contingent remainders” and “executory interests” (the lesser used of these interests include “interests subject to open,” “rights of first refusal,” “options to purchase,” and “powers of appointment”).

Unfortunately, “contingent remainders” and “executory interests” aren’t really self-explanatory unless you’re fresh from a discussion about property interests, so here’s a quick run through of both:

A “remainder” is what’s left over from a life estate.  For example:

A conveys Blackacre to B for life, then to C.

C has a remainder interest in Blackacre.  This interest becomes “contingent” when an additional condition is imposed:

A conveys Blackacre to B for life, then to C, should C graduate from law school.

In addition, a remainder interest is “contingent” if it is given to unborn or unascertained persons:

A conveys Blackacre to B for life, then to C’s heirs.

“Heirs” are only established after someone’s death.  Thus, the remainder interest held by C’s heirs is contingent on C actually having heirs at the time of her death.

As for executor interests, there are (unfortunately) two different types: “shifting” and “springing.”

One has a shifting executory interest if it is conditioned on the occurrence of some event:

A conveys Blackacre to B, but if C graduates from law school, then to C.

C has a shifting executory interest in Blackacre, which cuts off another grantee’s (B’s) interest upon the occurrence of a certain event (C’s graduation from law school).

A springing executory interest cuts short the grantor’s own interest with the occurrence of a certain event:

A conveys Blackacre to B, should B graduate from law school.

A retains a property interest in Blackacre until B graduates from law school, if ever.  B has a springing executory interest.

Note that these interests do not inherently violate the RAP, and the RAP applies to more than just these two interests.

They do, however, provide a helpful basis for illustrating cases in which the RAP is violated (which I’ll get into later).

Must vest, if at all

The best way that I’ve found to understanding this is to think of “vesting” as a game of catch.

The “ball” is the property interest, and it vests when it reaches the hands of a known, ascertained person.

The RAP requires that the ball reach someone, for certain, within the time limits (life plus 21 years).

If there’s even a remote possibility that this won’t happen, the property transfer violates the RAP.

No later than 21 years after some life in being

21 years is simple enough to understand.  However, “life in being” is a bit trickier.  It’s easier to understand with the added “at the creation of the interest” at the end.

In short, you simply look at which life or lives are “in being” (i.e. in existence and ascertainable) at the time of the creation of the interest.

Going back to the “game of catch” analogy, the person throwing the ball (the original grantor) must have a final recipient that is objectively identifiable at the time that the ball leaves the grantor’s hands (which is the time of the creation of the interest).

And the longest that the ball can stay out of someone’s hands is the “life in being” – also known as the “measuring life” – plus 21 years after that life ends.

You may not have a complete understanding of this yet, but we’ll put it all together after we cover…

The creation of the interest

As stated a few paragraphs ago, this is the point at which the ball leaves the original grantor’s hands.

If the property transfer is “devised” (e.g. left in a will), then the creation of the interest occurs at the time of the grantor’s death.

If the transfer is done via conveyance, it takes effect immediately (usually when the deed or other document is given).

The time of the creation of the interest is important because that is the point at which the clock starts to run.

Putting it together

The first step in determining whether the RAP applies is figuring out whether the interest at issue is a future interest, and, if so, whether it is a contingent remainder or executory interest (unless your test examiner is exceedingly cruel and uses another form of future interest, in which case, you should look elsewhere for help).

If the RAP does apply, we next need to determine when the interest is created.  This is most easily determined by the language used: “conveys” means during the grantor’s lifetime; “devises” means at the time of the grantor’s death.

Next, we look for any relevant life or lives “in being” at the time of the creation of the interest.  This is best understood by referring to such lives as being “measuring.” 

Think of it this way: the RAP imposes a time limit on the final vesting of property, and this time limit is composed of two parts: a “life in being,” and then 21 years after that life ends.

Since there can be no gap of time between the creation of the interest and the measuring life, we have to have an identifiable measuring life at the time of the creation of the interest to start the clock.

This can be a class of individuals, rather than just a single person, so long as the class is “closed” – that is, no additional members can be added.  Most often, such classes are someone’s heirs or children, and such a class is open until that person’s death.

RAP in action

Here’s an example to better help understand:

A conveys Blackacre to B and her heirs as long as tobacco is never grown on the property; but if tobacco is ever grown on the property, then to C and his heirs.

C’s property interest violates the RAP.  True, it’s possible that tobacco may be grown on Blackacre only six months after the interest was created.  Remember, though, that the RAP doesn’t care whether it’s possible that an interest could vest within the time limits.  It cares whether an interest will vest within the time limit for a certainty.

It’s possible that tobacco could be grown on Blackacre in 700 years.  Or never.  Therefore, we do not know for a certainty that the interest will vest 21 years after some life in being (here, a life in being could be B, but it also could be any random person alive at the time of the conveyance).  And that’s why C’s interest is not allowable under the RAP.

Here’s another example:

A devises Blackacre to B for life, then to the last of A’s grandchildren to reach the age of 22.

This is sort of a trick question, and you likely won’t see a question like this one on an exam without additional facts.  But this works very well for illustrative purposes.

First, note that A devised Blackacre to B, not conveyed.  This means that interest is created at the time that A dies.

Now, whether the interest of A’s grandchildren violates the RAP depends upon two factors:

  1. Whether any of A’s children survived A, and
  2. How old A’s youngest grandchild was at the time of A’s death.

If any of A’s children survived A, then the interest held by A’s grandchildren violates the RAP.  Although “A’s children” as a class would be closed (since A is dead and can’t have any more children), “A’s grandchildren” remains open because his kids are alive and able to procreate (the RAP assumes that people are able to have children until the day that they die).

Open classes are categorically excluded from being used as measuring lives, leaving the only closed class – A’s children – as the measuring lives.

Since it is possible for A’s children to keep having children until they themselves die, it may be more than 21 years after the last of A’s children dies until the interest finally vests. 

If, for example, the last of A’s children dies before the youngest of A’s grandchildren reaches the age of one, the interest would not vest until after the “life plus 21 years” limitation.  Despite the remoteness of this possibility, the interest of A’s grandchildren violates the RAP.

If none of A’s children survived his death, then the interest is valid if the youngest of his grandchildren is at least one year old at the time of A’s death – since we would know at the time of the creation of the interest (A’s death) whether the interest would vest in 21 years (note that had the required age in the original devise been 21 instead of 22, the interest would have been valid as long as A was not survived by any of his children).

There are many, many more examples that can be found, but, as with last week’s topic, I don’t have enough space to get into everything here.

If you have any specific questions, feel free to ask them in the comments below!