Future Interests Outline

P (party) I (interest) E (estate) D (defeasement) 1. present 1. life estate 1. Absolute 2. reversion 2. fee simple 2. sub. to exec. Limitation 3. vested rem 3. fee tail 3. sub. to condition subsequent 4. cont. remainder 4. Determinable are future 5. vested rem. sub to duration WORDS OF LIMITATION interests complete divestment 1. natural end 1. absolute = no interest 6. vest. rem. sub to partial fee tail & 2. sub to exec lim=exec int follow divestment life estate 3. sub cond sub=right of reentry f. tail & 2. no end: 4. determinable=pos. of reverter L. estate fee simple 7. shifting executory interest 8. springing executory interest 9. right of reentry 10. Possibility of Reverter 1. Who has present interest. i.e. o to a for life. Party interest estate defease a present life est. no o reversion fee simp. no 2. Know......No Test.(for vested/cont. remainder - FOR EXEC. INTEREST) i.e. do we know the party and can party take with no conditions. 1. If pass both have vested remainder be aware that 3 types of vested remainders... 2. reversion - goes back to the grantor. remainder - goes to grantee: grantee either vested or contingent 3. Can party lose estate after taking possession? ***If yes then: 1. Where does it go next (grantor or grantee): If to grantor then: 1. automatic = subject to con. Sub 2. optional = determinable If to grantee then: 1. subject to exec. limitation (**for both of these, then refer to unnatural interests under defeasement) EXAMPLES: 1. O to A. fee simple 2. O to A for life. life estate reversion fee simple 3. O to A for life, then to B. life estate vested rem. fee simple 4. O the A for life, then to B's kids (B is alive w/ no kids). life estate b's kids cont. rem fee simple reversion fee simple 5. O to A for life, then to B if B climbs Mt. Everest. life estate cont. rem fee simple reversion fee simple 6. O to A, but if A seels booze on land then to B. fee simple sub.exec. lim shift exec int fee simple 7. O to A when she marries, A is not married. fee simple sub. exec. lim spring ex. int fee simple 8. O to A for life then 10 years later to B. life estate reversion fee simple sub exec. lim spring ex int fee simple 9. O to A but if A farms land then O may re-enter and reclaim. fee simple sub. cond. sub right reentry fee simple 10. O to A until land is farmed. fee simple determinable right reentry fee simple *****NEVER END ON CONTINGENT REMAINDER ONLY VESTED.. 1. O to A & A's Heirs. fee simple 2. O to A for life. life estate reversion fee simple 3. O to A for life then to B's first child to go to college (none have gone). life estate cont. rem fee simple reversion fee simple 4. O to A for life, then B for life, then to C for life. life estate remainder life estate remainder life estate reversion fee simple ***not considered contingent rem. above because condition is not B being alive at time, this is just assumed that he is alive under the Know.......No Test 5. O to A for life, then to B if B not married (B is not married). life estate cont. rem fee simple reversion fee simple ***IF NOT ABSOLUTE OR REMAINDER, THAN MUST BE REVERSION. COMMON LAW RULES THAT AFFECT FUTURE INTERESTS 1. SHELLEY'S RULE ( grantee is loophole). O to A for life then to A's heirs. --Rule says heirs are a part of A so rewritten as: O to A (in fee simple absolute). **reasoning - to close inheritance tax loop, was no transfer tax so could give o to a for life than a's heirs and never have to pay taxes. EXCEPTION: at common law - when heirs are split (i.e. o to a for life, then b fo life, then a 's heirs/ this is allowed) DOCTRINE OF WORTHIER TITLE O to A for life then to O's Heirs. O's heirs equal O so : A has present life estate & reversion to O in fee simple (NOT O's Heirs). COMMON LAW RULE AGAINST PERPITUITIES REASONING: when property is splintered over a long period of time with unvested interests hanging open, court does not like restrictions on alienation so pulls the interests back together after 21 years of some life.... 1. All interests must vest.... A. Good Interests 1. Contingent remainders 2. Springing exec. interests 3. Subject to open B. Bad Interests 1. Shifting exec. interest (90% of time). 2. If at all............Either MUST VEST or will be DESTROYED. 3. Before everyone dies or within 21 yrs of their death.... 1. everything must vest 2. everything must be destroyed within this time frame O to A , but if A or his heirs farms, then to B. A farms 2 years later. 1. State Title at Time of Conveyance using PIED Chart. shifting fee simple sub. exec lim so is bad shift ex int. fee simple 2. Apply the Rule Against Perpituities. **Does it vest or is it destroyed while A & B alive? fee simple pos. of revert fee simple abso 3. Do the Adjustments. -B's interest is killed because is bad, so can't have it - is wiped out. (kills t interest only, NOT the limitations). -possibility that A will never farm, nor his heirs, so B's interest may never vest this makes the interest bad. RAP destroys it. **Executory Interests are exception: 1. the condition must occur during the life of parties. GOOD - O to A, but if A divorces my daughter than to B. O to A, then to B if B graduates law school. fee simp sub ex limitation shifting ex int fee simple **Both are good because the condition must be met and occur during life of parties - can't divorce or finish law school when you are dead. EXCEPTIONS TO RAP (Remember which 3 interests are usually good) 1. Generation Jump O to A for life, then B's grand kids who reach 21. ***Presumed to be good UNLESS grand parent is alive - if grandparent is alive, then NOT good because still open. Good - O devises to his grandkids who reach 21. (good because devises means dead, does not fall under exception). Bad - O conveys to his grandkids who reach 21, none are 21. (bad because conveys means O is alive, kids have unvested interest, falls under exception.) 2. Neighbors Kids O to A for life, then to B's kids who reach 30, kids are not 30, are 13, 27, 29. ***Good - UNLESS parent is alive, then cross out kids interest. 3. Unborn Widow O to A for life, then to A's widow for life, then to A's surviving kids. ***Don't know who widow is. Look for WIDOW and SURVIVING as key words. Don't know who widow is until A is dead so not good. *****REMEMBER - 99% OF TIME CONT. REMAINDER, SPRINGING EXEC. INT, AND VESTED SUBJECT TO OPEN ARE GOOD. UNLESS FALL UNDER EXCEPTIONS. General Rules. 1. You're alive if you have been conceived. 2. You're never to old to have children (fertile octogenarian rule) 3. A shifting executory interest if owned by a charity will not be killed to be nice to charity. ----- Brought to you by - The 'Lectric Law Library The Net's Finest Legal Resource For Legal Pros & Laypeople Alike. http://www.lectlaw.com