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RULE AGAINST PERPETUITIES

RULE AGAINST PERPETUITIES

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RULE AGAINST PERPETUITIES

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  1. RULE AGAINST PERPETUITIES

  2. NO INTEREST IS GOOD UNLESS IT MUST VEST, IF AT ALL, NOT LATER THAN 21 YEARS AFTER SOME LIFE IN BEING AT THE CREATION OF THE INTEREST- John Chipman Gray

  3. If, at the creation of a nonvested interest, there is some life in being within 21 years of whose death the nonvested interest must absolutely vest or fail, the nonvested interest is good (valid). If there is no such individual, the interest is bad (invalid) Sheldon F. Kurtz

  4. WHY HAVE THE RULE?

  5. What kind of interests are NOT subject to the Rule?

  6. Indefeasibly vested remainders Vested remainders subject to divestment if limited to an individual These are vested from the moment they are created.

  7. What kind of interests ARE subject to the Rule?

  8. Contingent remainders Executory interests Future interests in a class whether vested or contingent

  9. When is an interest created under the rule?

  10. Lifetime transfers • Irrevocable transfers • Revocable transfers

  11. Testamentary Transfers

  12. Transfers resulting from exercise of power • GPA (inter vivos) • GPA (testamentary) • SPA (inter vivos or testamentary)

  13. How nonvested interest vests under the rule

  14. Remainders vest either: By becoming vested, i.e, not be subject to a condition precedent Class closing and all conditions precedent occurring for each and every member of the class

  15. Executory interests vest either: • In the case of shifting interests by becoming vested remainders or becoming possessory • In the case of springing interests by becoming possessory

  16. The lives in being (Must be Human Lives)

  17. Relevant lives • Validating lives

  18. Relevant Life: A relevant life is a person who can affect whether or not the interest vest

  19. Validating Life: That relevant life or lives IF ANY within 21 years of whose death the interest is absolutely guaranteed to timely vest or fail to vest

  20. An interest if valid if it must:

  21. vest or fail to vest during the lifetime of the validating life; or vest or fail to vest at the death of the validating life; or

  22. vest or fail to vest within 21 years of the death of the validating life, or vest or fail to vest within 21 years of the creation of the interest

  23. A validating life cannot be a member of a class unless the class is closed at the time that the non vested interest is created

  24. Steps in Doing a Perpetuity Analysis

  25. Determine when interests are created. • Classify all interests • Determine which if any interests MIGHT violate the rule

  26. Determine if there is a relevant life Determine if there is a validating life Assess validity

  27. In order to determine whether a disposition is “good” or “bad” under the Rule you must know:

  28. The language of the disposition Its construction (i.e, what do the words mean) or Construe First Cont’d

  29. Facts about who survive at the time the nonvested interest is created (relevant and/or validating lives)

  30. T devises property to A for life, then to A’s children who attain age 21.Good or Bad Under the Rule?Question: Is their a validating life

  31. T devises property to A for life, then to A’s children who attain age 25. Good or Bad Under the Rule?Hint: Is their a validating life

  32. THE MIGHT HAVE BEEN RULE(what might happen)

  33. T wills property to A for life, then to B if anyone returns from Rome Scenario 1: At the time of T’s death, someone had already returned from Rome Scenario 2: At T’s death, no one has yet returned from Rome. However, two weeks later C returns from Rome

  34. Problems Pages 796-797 • To A for life, then to B for life if any person goes to Saturn • To A for life, then to A’s first child to pass the bar • What does the phrase “first child” mean? • Options • First child born to A and then only if he/she passes the bar • First child of A whenever born who passes the bar

  35. ASCERTAINING THE MEASURING LIVES

  36. T wills property to A for life, then to B if B attains age 75

  37. T wills property to his wife for life, then 25 years after her death to such of his (T’s children) as are then living

  38. T wills property to A for life, then to A’s oldest surviving child for life, then to that child’s oldest child for life, then to B • A, B and A’s son S survive T • A, B and no child of A survive T

  39. FERTILE OCTOGENARIAN

  40. T devises property to Trustee to pay income to A for life, then to A’s children for their lives, then to A’s grandchildren who are then living Scenario 1: At T’s death, A is living. A is age 80. Scenario 2: At T’s death, A is incapable of having children. Scenario 3: At T’s death, A’s children but not A are living Fertile Octogenarian

  41. Problem 3, 800Problem 4, page 800

  42. PRECOCIOUS TODDLER

  43. T by will to A for life, remainder to such of A’s grandchildren who survive T or are born within 5 years of T’s death if they later reach the age of 25. Survived by child A but no children or grandchildren of A Survived by child A and 2 grandchildren and 3 children of A Survived by 2 grandchildren of A but not by A or any children of A Precocious Toddler

  44. The Unborn Widow See, Dickerson v. Union National Bank of Little Rock

  45. T devises property in trust to pay the income to Son for life, then to Son’s widow for her life, then to S’s then surviving issue. At T’s death: • Son and his wife, Jane survive T. • Is gift to issue good or bad under the rule? • Could T’s will have been interpreted in such a way that it does not violate the Rule? • If T’s will violates the rule, how might it have been drafted initially to be valid?

  46. SLOTHFUL EXECUTOR

  47. T wills the residue of T’s estate to T’s spouse to be paid to the spouse one year after T’s will is probated.

  48. Alternative Contingencies Doctrine

  49. Gift to vest (by express words in instrument) on one of two events One event could occur beyond permissible period (first event) One event can only occur within permissible period (2nd event) Gift VALID if second event is the one that ACTUALLY occurs Gift VOID if first event is the one that ACTUALLY occurs

  50. T devises property in trust to pay income to daughter A for life, then to A’s widower for his life, then, upon the death of the widower, ORupon the death of A, if no spouse of A survives A, to A’s surviving issue