Rule against perpetuities
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The rule against perpetuities is a rule in property law which prohibits a contingent grant or will from vesting outside a certain period of time. If there is a possibility of the estate vesting outside of the period, regardless of how remote, the whole interest is void, and is stricken from a grant. The rule is concerned with the utility of property and tries to prevent people from tying up assets for too long a period of time—a concept often referred to as control by the "dead hand" or "mortmain." That is, the purpose is to "limit the testator's power to earmark gifts for remote descendants."[1] The rule was enacted to prevent the concentration of wealth in society. When a part of a grant or will violates the Rule, only that portion of the grant or devise is removed; all other parts that do not violate the Rule are still valid conveyances of property.
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[edit] Historical background
The Rule against Perpetuities has its origin in the Duke of Norfolk's Case, 3 Ch. Cas. 1, 22 Eng. Rep. 931 (Ch. 1682), of 1682. That case concerned Henry, Earl of Arundel (later the Duke of Norfolk), who had tried to create a shifting executory limitation so that one of his titles would pass to his eldest son (who was mentally deficient) and then to his second son, and another title would pass to his second son, but then to his fourth son. The estate plan also included provisions for shifting the titles many generations later, if certain conditions should occur.
When his second son, Henry, succeeded to one title, he did not want to pass the other to his younger brother, Charles. Charles sued to enforce his interest, and the court (in this instance the House of Lords) held that such a shifting condition could not exist indefinitely. The judges believed that tying up property too long beyond the lives of people living at the time was wrong, although the exact period was not determined until another case, Cadell v. Palmer, 1 Cl. & Fin. 372, 6 Eng. Rep. 936 (H.L. 1832, 1833), 150 years later.
[edit] The common law rule
The Deluxe Eighth Edition of Black's Law Dictionary defines the rule against perpetuities as "[t]he common-law rule prohibiting a grant of an estate unless the interest must vest, if at all, no later than 21 years (plus a period of gestation to cover a posthumous birth) after the death of some person alive when the interest was created."
At common law, the length of time was fixed at 21 years after the death of an identifiable person alive at the time the interest was created. This is often expressed as "lives in being plus twenty-one years." Under the common-law rule, one does not look to whether an interest actually will vest more than 21 years after the lives in being. Instead, if there exists any possibility at the time of the grant, however unlikely or remote, that an interest will vest outside of the perpetuities period, the interest is void and is stricken from the grant.
[edit] Statutory modification
In order to avoid the complexities of the rule, many jurisdictions have statutes that either cancel out the rule entirely or put clearer limits on the period of time and who is affected by it.
About half of the states in the United States follow the Uniform Statutory Rule Against Perpetuities, which gives a grantor 90 years for the interest to vest. If the interest does not vest to some life in being within 90 years, the grant will be reformed judicially so that it does vest.
Other states follow a "wait and see approach," whereby if the interest does not vest within 21 years, the court will either reform the grant so it does or strike the clause that violates the rule.
[edit] Problems with the rule
The application of this rule has proven to be difficult in certain situations. The difficulty comes from the problem of identifying who the "lives in being" are and the confusing rules that limit who they can be. For example, if there is any chance of "after-births," newborns who enter the "lives in being" category, then the whole group cannot be the "lives in being."
[edit] Queen Victoria's descendants
The class of people must be limited and determinable. Thus, one cannot say in a deed "until the last of the people in the world now living dies, and then 21 years". For a time, it was popular to make the term of a deed until the last of the descendants of Queen Victoria who now lives in being dies, plus 21 years. This was grudgingly upheld by the courts.
[edit] Fertile Octogenarian
Furthermore, there is the legal fiction of the fertile octogenarian, which assumes that a living person, regardless of sex, age, or physical condition, will always be capable of having more children, thus allowing an interest to vest 21 years after all the lives in being at the time of the grant are dead. In certain places this assumption will be limited to a fixed age set by statute. Furthermore, many jurisdictions have discarded old common-law fictions such as the "fertile octogenarian." A related legal fiction, which assumes that a living person is fertile at birth, is known as the "precocious toddler".
[edit] Unborn Widow
The problem of the unborn widow is a frequently used illustration of the Rule's complexities. Suppose that a woman, A, wants to devise her estate to her son B and his wife, and then to their children.
A's devise might look something like this:
- To B for life, then to his widow, if any, for life, then to B's children then living.
Though this seems like a reasonable devise, it actually violates the Rule because there is a possibility, however remote, that the interest to "B's children then living" will vest more than 21 years after the deaths of all lives in being.
Suppose B is married without children at the time of the devise. Suppose further that B's wife were to die or B were to divorce. If B were to remarry to someone who was born after the devise, the new wife would not be a life in being at the time of the devise. Similarly, any children born to B and his new wife would also not be lives in being at the time of the devise. If B's new wife were to outlive him (making her his widow) and survive him by more than 21 years, then the interest to "B's children then living" would not vest until after the perpetuities period expired (21 years after the death of B, the only relevant life in being at the time of the devise), because only upon the death of the widow can one ascertain who are "B's children then living."
Alternately, if B is not married at the time of the devise and B were to get married afterwards, again the wife could not be a life in being since she is not identifiable at the time of the devise. Similarly to the previous case, she could outlive B by more than 21 years, voiding the grant to their children (who also could not be lives in being because they would have been born after the devise was made).
However, if the last interest were simply to B's children, rather than to B's children then living, it would vest upon B's death because at that time all of B's children would be ascertainable. In this instance, the devise would be valid under the Rule.
[edit] Charity-to-charity Exception
The Rule never applies to conditions placed on a conveyance to a charity that, if violated, would convey the property to another charity. For example, a conveyance "to the Red Cross, so long as it operates an office on the property, but if it does not, then to the Roman Catholic Church" would be void against the Rule, except that both parties are charities. Even though the interest of the Church might not vest for hundreds of years, the conveyance would nonetheless be held valid. The exception, however, does not apply if the conveyance, upon violation of the condition, is not from one charity to another charity. Thus, a devise "to John Smith, so long as no one operates a liquor store on the premises, but if someone does operate a liquor store on the premises, then to the Roman Catholic Church" would violate the rule. The exception would not apply to the transfer from John Smith to the Roman Catholic Church because John Smith is not a charity.
[edit] Savings clause
To avoid problems caused by incorrectly drafted legal instruments, practitioners in some jurisdictions include a "Savings clause" almost universally as a form of disclaimer. This standard clause is commonly called the "Kennedy clause" or the "Rockefeller clause" because the determinable "lives in being" are designated as the descendants of Joseph Kennedy, the father of John F. Kennedy, or John J. Rockefeller. Both designate well-known families with many descendants, and are consequently suitable for named, identifiable lives in being. This is a similar strategy to the use of Queen Victoria's descendants indicated above.
[edit] References
- ^ Richard Posner Economic Analysis of the Law 2nd ed. (1977), sec. 18.7 at page 394.
[edit] External links
- Q&A Tutorial by Professor June Carbone at Santa Clara University School of Law
