Rules have been created to protect the marketability of estates. For example, if a future interest with a contingent remainder is in existence (a condition necessary for the conveyance to occur), then the condition could be met decades later. This discourages marketability because people are averse to purchasing estates to which they have no claim if the condition is met. To combat this issue, the rule against perpetuities was created.
The rule states:
“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.”
In other words, we are looking at the time before a condition is met. To pass the rule, the condition must vest (transfer) or forever fail within 21 years of the last person alive with a future interest (“life in being”). So, if there is any example where it could vest after 21 years of the last life in being, it automatically fails the test.
This rule only applies to contingent remainders, executory interests, and vested remainders subject to open.
Steps to determine if the rule applies
- “Identify the contingent interest
- List the lives in being
- Consider whether anyone can be born who might affect vesting
- Set a hypothetical date for the lives in being to die then add 21 years
- Ask, ‘will this contingent interest vest at any point after 21 years?’ If so, the interest is void.”
Examples:
- Pass
- “A conveys to B if B finds a cure to cancer.” This vests or will never vest within B’s lifetime so it passes.
- “A conveys to B for life, then to C’s first child to reach 18.” If C never has a child, it will forever fail. If C does have a child then dies, the child will reach 18 before the 21 years after C’s death.
- Fail
- “A conveys to B if anyone finds a cure to cancer.” This has the potential to vest after B’s lifetime so it fails.
- “A conveys to B for life, then to C’s first child to reach 30.” If C has a child within a year then all parties die right after, C’s child will not reach 30 before there is a vested interest. Because 30 is larger than 21, it fails.
Additional Notes
The rule against perpetuities is designed to put a time limit on how long an interest is allowed to not be ascertainable.
So, the way this works is that the future interest will vest (when uncertainty is removed) or forever fail between the conveyance and 21 years after death of the parties. Otherwise, the conveyance is void.
However, this analysis only needs to be done if we determine that the future interest is an executory interest, contingent remainder, or a vested remainder subject to open.
Here are the complete steps for an analysis:
- Determine the present interest
- Determine the future interest
- If the future interest is an executory interest, contingent remainder, or a vested remainder subject to open, then we need to do a RAP analysis
- If the interest fails, then conveyance the conveyance is void.
Steps from Class:
- Determine which future interests have been created by the conveyance.
- Identify the conditions precedent to the vesting of the suspect future interest. What has to happen before a future interest holder can take?
- Find a measuring life. Look for a person who is alive at the date of the conveyance and ask whether that person’s life or death is relevant to the condition’s occurrence.
- Ask, “Will we know, with certainty, within 21 years of the death of our measuring life, if our future interest holders will or will not take?”
Jee v. Audley
29 Eng. Rep. 1186 (1787)
The Jee family are suing to receive the money from the estate.
Question
Did the will violate the rule?
Rule
No interest can vest, if at all, no later than 21 years after a life in being at the creation of the interest.
Holding
This case violates the rule against perpetuities.
Facts
Audley drafted a will directing that 1,000 pounds goes to his wife until she dies then transfers to his niece. If she defaulted, then it would go the the children of Mr. and Mrs. Jee.
Analysis
This case violates the rule against perpetuities. The reason being that at the time Mr. Audley issued the conveyance, Mr. and Mrs. Jee were able to have more kids. Although it was improbable (being in their 70s), it was still possible. Therefore, there is a time pictured where the interest could be held 21 years after all lives in being had passed.
Additional Notes
The takeaway from this case is that RAP does not deal with science. A person can still have a child even after they are several years beyond childbearing ability.
RAP Reforms
Wait and See approach
This approach means that the courts will wait to see whether the vestment happens within the 21 years. If not, then it becomes void.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
