Rule Against Perpetuities
Rule Against Perpetuities:
Of all the rules that have developed with regard to limiting the ability to transfer property, the one with the strongest ramifications today is the Rule Against Perpetuities. Although this rule’s ramifications are most significant when it comes to drafting trusts (which will be a major subject in the course on Wills, Trusts and Estates), we will discuss it in this section because it developed as a property rule. Unfortunately, the Rule Against Perpetuities is also quite complicated. We will try to break it down into terms that are as simple as possible.
Simply stated, the Rule Against Perpetuities states that certain interests in property must vest, if at all, within 21 years after the death of a life in being at the time that the interest was created.
The purpose of the rule is to prevent a person from drafting any kind of transfer agreement that could control the destiny of the land he is giving up fifty or sixty or a hundred or two hundred years after he is gone. In essence, the law seeks to prevent dynastic property whose transfer is restricted by the wishes of someone who has been dead for hundreds of years.
The rule applies to executory interests and contingent remainders. Interests that the grantor keeps (such as reversions and rights of re-entry) are exempt from the rule because, since the grantor is keeping the interest anyway, there is no reason he should not be able to control it (he could have controlled it without giving it away anyway).
The way to analyze whether a conveyance violates the Rule Against Perpetuities without having to think about all the convoluted policies that are behind it is to follow the following steps:
- Determine whether there is a future interest involved in the conveyance that falls under the rule (contingent remainder or executory interest).
- If there is such a future interest, is there any limitation on when the person holding that interest can actually get the property? If there is no such limitation (it can vest any time between now and eternity), the conveyance violates the rule and it is void.
- If there is a limitation, determine which person or people are relevant in deciding when the future interest vests. These people are called the “measuring lives”.
- Finally, determine whether it is possible that the interest vests more than 21 years after the deaths of all of the people who are currently alive and who are relevant to the vesting of the future interest.
Let’s look at some examples:
- Batman conveys the batcave “to Alfred for life and then to Robin.” This does not violate the Rule Against Perpetuities because it is a vested remainder, not a contingent remainder. The Rule Against Perpetuities does not apply to vested remainders.
- Batman conveys the batcave “to Alfred for life and then to the oldest of Robin’s children.” This is a contingent remainder, but it is valid under the Rule Against Perpetuities. Think about the latest time that the interest can vest. That would be the time that Alfred dies (in fact, it’s the only time that the interest can vest). Thus, it is impossible for the interest to vest more than 21 years after Alfred’s death and so the conveyance is valid.
- Batman conveys the batcave “to Alfred for life and then to the oldest of Robin’s children when he or she reaches 30 years old". Is it possible for this interest to vest more than 21 years after the death of everyone involved in the conveyance? Yes, it is. How? All of Robin’s children could die and Robin could have another child. Alfred could then die when that child is one year old. Thus, the interest would not actually vest in Robin’s oldest child until 29 years after the death of Alfred. Since no other person is relevant in determining when the interest vests, Alfred is the measuring life. Since the interest could vest more than 21 years after his death, the conveyance is not valid. See
White v. Hayes, 2003 Tenn. App. LEXIS 683 (2003).
- Batman conveys the batcave “to Robin, so long as the batcave is not used as a bar or restaurant.” The future interest involved here is in the grantor (it is a possibility of reverter). Thus, the Rule Against Perpetuities does not apply. So, even though Robin’s great great grandchild could forfeit the batcave by turning it into a restaurant, the conveyance is valid.
- Batman conveys the batcave “to Robin, so long as the batcave is not used as a bar or restaurant, and then to Riddler. Riddler has an executory interest. Thus the Rule Against Perpetuities applies. Is it possible for the interest to vest more than 21 years after the death of everyone involved? Sure! Riddler’s interest could vest when Robin’s descendant, 500 years later, turns the batcave into a restaurant. Obviously Riddler would not be around to take the batcave, but his descendants would be able to. Thus, the conveyance is not valid.
The Rule Against Perpetuities sometimes leads to absurd results because it assumes that even the most unlikely of scenarios are possible in making the Rule Against Perpetuities determination. For example, the Rule Against Perpetuities assumes that a woman can always have another child. For example:
Marge is 80 years old. She has three children, Bart, Lisa and Maggie, who are each in their 50s. Homer conveys a house “to Marge for life and then to the oldest of Marge’s children who survive her when he or she reaches the age of 30.” This conveyance violates the rule. Why? Because it is possible that the interest will not vest in anyone involved who is alive today. How? Bart, Lisa and Maggie could all die tomorrow and then Marge could have another child and then die. Then the interest would not vest until almost 30 years after the deaths of Marge and all her children, who are the measuring lives. Obviously, this scenario is almost impossible, primarily because Marge will not have a child at age 80. Nevertheless, the rule is violated because the law considers anything possible. This aspect of the rule is wittily known as the “fertile octogenarian rule.”
Note, however, that many states have made modifications to the Rule Against Perpetuities, mostly with an eye toward avoiding absurd results. For example, many states now drop the assumption that a woman can always have another child for any woman above the age of 55.
There are many more complicated permutations that can arise from this rule, and we will discuss the rule again in the Wills and Trusts course. For now, just try to use the following flow chart to determine whether or not a conveyance violates the Rule Against Perpetuities.