When the holder of an estate grants or devises it to another, he may wish to control the recipient's use of it. For example, if A owns a mansion, he may wish to leave it to his nephew when he dies, but ensure that his wife can live there until she dies. A, the grantor, can accomplish this by giving in his will a life estate to his wife and the remainder to his nephew. By making such a will, he is able to accomplish his goals, even though he's dead at the time.

The Rule against Perpetuities requires that all such provisions in a will or other grant occur within the time span defined by a life in being at the time of the grant, plus twenty-one years (plus, if one wishes to be excruciatingly correct, an appropriate human gestation period). Any provision that cannot be proven to occur or fail within the time span is invalid and will be stricken from the grant.

In the previous example, it is clear that the nephew (or his heirs) will get the mansion after A's wife dies, so her life can be used as the "measuring life." The mansion will reach its final owner immediately after the wife dies, which is well within the time span determined by her life plus twenty one years.

On the other hand, if A was to will the mansion to his wife for life, then to the first of his nephew's children to turn 25, the second part of the grant fails -- the best measuring life is the nephew, and it's possible that he'd die while all of his children were younger than 3, so even if any of them reach 25, it wouldn't happen within 21 years of the nephew's death. (Of course, if the nephew had any children at the time of the grant, A could fix his will by naming the child, but it's possible that the named child would die before reaching the age of 25.

The key to determining whether a grant satisfies the Rule against Perpetuities is picking an appropriate measuring life. Once the correct life is selected, it's usually trivial to see whether the grant is good.

I hesitate to discuss the history behind this, because I'm just a law student and my goal is to pass the bar, not to write a treatise on property law, but wharfinger asked, so...

The rule originated in the Duke of Norfolk's Case in 1681. At the time, landowners (perhaps only recently landed themselves) were trying to protect their estates and ensure that their heirs couldn't bungle their way back into poverty. However, the various interests in land that are created when somebody tries to control ownership for decades or centuries tend to cruft up the system. After all, who remembers, 50 or 100 years after you die, that you wanted Cousin Bob's third grandchild to have Blackacre if he married the Earl of Fauntleroy's second cousin once removed, unless she was insufficiently pneumatic, in which case Bob's sister Emma's second child Roderick was to inherit? But these people would show up in court with a title to the land and give the judges migraines (not to mention, kicking out whoever happened to be living on the estate at the time.)

So the Rule against Perpetuities is designed to limit the appearance of these litigants and enhance the alienability of the land -- a buyer need not worry so much about Roderick showing up with a good title.

Amazing what one learns in law school...

A notoriously complicated rule of property law, abolished in a number of American jurisdictions and altogether abolished in England. The Rule has plagued law students since the Seventeenth Century.

The aim of the Rule to ensure that a future property interest vest or fail to vest within 21 years of the death of a "validating life." This is merely another way of saying that the purpose of the Rule is to prevent you from writing a will that leaves some piece of property "to my son, then to his child, then to his child," and so on. Legal thinkers viewed this as counter-utilitarian, i.e. that it goes against the best-use principle (land should always be afforded its best use to promote economic growth)and allows a long-dead ancestor to exert control from beyond the grave in deciding who owns what land.

At least one court has ruled that the Rule Against Perpetuities is so "perplexing" that failure to apply it does not constitute legal malpractise.

Lucas v. Hamm, 56 Cal. 2d 583; 364 P.2d 685; 15 Cal. Rptr. 821 (Cal. 1961)

Supreme Court of California

Plaintiffs, who are some of the beneficiaries under the will of Eugene H. Emmick, deceased, brought this action for damages against defendant L. S. Hamm, an attorney at law who had been engaged by the testator to prepare the will. They have appealed from a judgment of dismissal entered after an order sustaining a general demurrer to the second amended complaint without leave to amend.

The allegations of the first and second causes of action are summarized as follows: Defendant agreed with the testator, for a consideration, to prepare a will and codicils thereto for him by which plaintiffs were to be designated as beneficiaries of a trust provided for by paragraph Eighth of the will and were to receive 15 per cent of the residue as specified in that paragraph. Defendant, in violation of instructions and in breach of his contract, negligently prepared testamentary instruments containing phraseology that was invalid by virtue of section 715.2 and former sections 715.1 and 716 of the Civil Code relating to restraints on alienation and the rule against perpetuities. n1 Paragraph Eighth of these instruments "transmitted" the residual estate in trust and provided that the "trust shall cease and terminate at 12 o'clock noon on a day five years after the date upon which the order distributing the trust property to the trustee is made by the Court having jurisdiction over the probation of this will." After the death of the testator the instruments were admitted to probate. Subsequently defendant, as draftsman of the instruments and as counsel of record for the executors, advised plaintiffs in writing that the residual trust provision was invalid and that plaintiffs would be deprived of the entire amount to which they would have been entitled if the provision had been valid unless they made a settlement with the blood relatives of the testator under which plaintiffs would receive a lesser amount than that provided for them by the testator. As the direct and proximate result of the negligence of defendant and his breach of contract in preparing the testamentary instruments and the written advice referred to above, plaintiffs were compelled to enter into a settlement under which they received a share of the estate amounting to $ 75,000 less than the sum which they would have received pursuant to testamentary instruments drafted in accordance with the directions of the testator.

* * *

The complaint, as we have seen, alleges that defendant drafted the will in such a manner that the trust was invalid because it violated the rules relating to perpetuities and restraints on alienation. These closely akin subjects have long perplexed the courts and the bar. Professor Gray, a leading authority in the field, stated: "There is something in the subject which seems to facilitate error. Perhaps it is because the mode of reasoning is unlike that with which lawyers are most familiar. . . . A long list might be formed of the demonstrable blunders with regard to its questions made by eminent men, blunders which they themselves have been sometimes the first to acknowledge; and there are few lawyers of any practice in drawing wills and settlements who have not at some time either fallen into the net which the Rule spreads for the unwary, or at least shuddered to think how narrowly they have escaped it." (Gray, The Rule Against Perpetuities (4th ed. 1942) p. xi; see also Leach, Perpetuities Legislation (1954) 67 Harv.L.Rev. 1349 (describing the rule as a "technicality-ridden legal nightmare" and a "dangerous instrumentality in the hands of most members of the bar").) Of the California law on perpetuities and restraints it has been said that few, if any, areas of the law have been fraught with more confusion or concealed more traps for the unwary draftsman; that members of the bar, probate courts, and title insurance companies make errors in these matters; that the code provisions adopted in 1872 created a situation worse than if the matter had been left to the common law, and that the legislation adopted in 1951 (under which the will involved here was drawn), despite the best of intentions, added further complexities. (See 38 Cal.Jur.2d 443; Coil, Perpetuities and Restraints; A Needed Reform (1955) 30 State Bar J. 87, 88-90.)

In view of the state of the law relating to perpetuities and restraints on alienation and the nature of the error, if any, assertedly made by defendant in preparing the instrument, it would not be proper to hold that defendant failed to use such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly exercise. The provision of the will quoted in the complaint, namely, that the trust was to terminate five years after the order of the probate court distributing the property to the trustee, could cause the trust to be invalid only because of the remote possibility that the order of distribution would be delayed for a period longer than a life in being at the creation of the interest plus 16 years (the 21-year statutory period less the five years specified in the will). Although it has been held that a possibility of this type could result in invalidity of a bequest ( Estate of Johnston, 47 Cal.2d 265, 269-270 (303 P.2d 1); Estate of Campbell, 28 Cal.App.2d 102, 103 et seq. ( 82 P.2d 22)), the possible occurrence of such a delay was so remote and unlikely that an attorney of ordinary skill acting under the same circumstances might well have "fallen into the net which the Rule spreads for the unwary" and failed to recognize the danger. We need not decide whether the trust provision of the will was actually invalid or whether, as defendant asserts, the complaint fails to allege facts necessary to enable such a determination, n3 because we have concluded that in any event an error of the type relied on by plaintiffs does not show negligence or breach of contract on the part of defendant. It is apparent that plaintiffs have not stated and cannot state causes of action with respect to the first two counts, and the trial court did not abuse its discretion in denying leave to amend as to these counts.

Footnotes n1 Former section 715.1 of the Civil Code, as it read at the times involved here, provided: "The absolute power of alienation cannot be suspended, by any limitation or condition whatever, for a period longer than 21 years after some life in being at the creation of the interest and any period of gestation involved in the situation to which the limitation applies. The lives selected to govern the time of suspension must not be so numerous or so situated that evidence of their deaths is likely to be unreasonable difficult to obtain."

Section 715.2 reads as follows: "No interest in real or personal property shall be good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest and any period of gestation involved in the situation to which the limitation applies. The lives selected to govern the time of vesting must not be so numerous or so situated that evidence of their deaths is likely to be unreasonably difficult to obtain. It is intended by the enactment of this section to make effective in this State the American common-law rule against perpetuities."

Former section 716, as it read at the times involved here, provided: "Every future interest is void in its creation which, by any possibility, may suspend the absolute power of alienation for a longer period than is prescribed in this chapter. Such power of alienation is suspended when there are no persons in being by whom an absolute interest in possession can be conveyed. The period of time during which an interest is destructible pursuant to the uncontrolled volition and for the exclusive personal benefit of the person having such a power of destruction is not to be included in determining the existence of a suspension of the absolute power of alienation or the permissible period for the vesting of an interest within the rule against perpetuities."

I hesitate to write this, but I thought I’d do it anyway because some of the information above in other writeups is wrong, and the modern rule against perpetuities remains valid and relevant in many jurisdictions, even those that have modified its operation. And since I’m trying to put my notes in order I thought this was as good a time as any.

The term ‘rule against perpetuities’ usually now refers to what used to be known as the “modern” rule against perpetuities, as it is slightly newer than the ‘older’ rule against perpetuities also known as the rule in Whitby v Mitchell (1890) 44 Ch D. This rule is of historical interest only as it has been abolished in most jurisdictions. Very briefly, the rule in Whitby v Mitchell was that the grant of land to the issue of an unborn person was void.

The content of the rule

One formulation of the rule that is easy to read is the version put forward by Professor Peter Butt in Land Law, 5th ed, Lawbook Co., Sydney, 2006 at p162:

An interest limited to arise in the future is void from the outset unless it must vest (if it is to vest at all) within the perpetuity period. The perpetuity period is the period of a life, or lives in being at the date the instrument creating the interest comes into operation, plus a further 21 years (and if necessary, a gestation period for an unborn child).

The rule against perpetuities is a way the law has evolved to balance the interests of the present generation to control their property, and future generations to have certainty in interests of which they have a part of.

Vesting

The rule against perpetuities is concerned with a possibility that the interest given to someone may possibly vest outside the perpetuity period. What this means requires a few explanations. An interest is ‘vested’ for the purpose of the rule if:

  1. All persons entitled to take an interest must be ascertained finally
  2. All conditions attached to the creation or transfer of interest have been met, and the interest is ready take effect subject to any prior interest.
  3. In the case where a gift is to a class of people, the fractional share of each person is ascertained and therefore the class of people is closed. This requirement is really a logical outcome of the first.

Suppose there is a gift in a will of land ‘to A for life, remainder in fee simple to B’ and testator is dead. The gift to A of a life estate satisfies all the above requirements and is vested in interest, and is also said to be vested in possession as A is entitled to possession as the owner of a freehold estate in land.

What is less intuitive is that the remainder in fee simple to B is also vested in interest. This is because it satisfies all three rules above. Though it is sometimes described as a ‘future’ interest, it is also a certain interest because B (or his heirs) will definitely take the fee simple upon A’s death. This means that this gift is not capable of offending the rule against perpetuities as both are vested upon the making of the gift.

As the rule is an expression of the common law’s abhorrence of uncertainty, it is important to remember that the rule is only concerned with the commencement, and not the duration of an interest. Thus the operation of the rule is often in judging the validity of contingent remainders (remainders that do not vest until a condition precedent is met) or powers of appointment under a trust.

Another example is a devise ‘to A for life, remainder to A’s eldest child when he attains 25’. The remainder in this case is contingent, and is not vested in interest for failure to meet requirement 2 above.

Life or lives in being

The life in being used to ascertain the perpetuity period can be designated expressly in the grant, or it can be implied if not expressly so designated. In practice they are usually beneficiaries, or people who can affect the condition attached to the gift. The life in being must be a human life, which is certain at the time of the gift, and if a class, then the class must not be capable of increase.

In order to extend the period as far as possible, sometimes a class of people are designated, with the interest expressed to vest 21 years after the death of the last surviving class member. This is leads to the practice of expressing a gift to vest after the death of the last lineal descendant of Queen Elizabeth II living at the time of the gift. Sometimes other notable people are used as well.

The implication of this is that in a devise by will of land ‘to my grandchildren’ will be valid. The lives in being are implied, and will be the testator’s children, whose children themselves must be born within the duration of their lives. However, a gift inter vivos in the same terms is not (prima facie, unless assisted by class closing rules) valid. This is because the life in being must be the testator’s, as the class of children can be increased. The law assumes that the class of children and therefore the class of grandchildren is capable of increase, and the interest might vest outside of the period of 21 years after the testator’s death.

Void from the outset

At common law, the rule against perpetuities is applied against possibilities at the time of the instrument creating the interest coming into operation, not probabilities or actual events during the perpetuity period. If an interest cannot be said to be certain to vest (if it vests at all) within the perpetuity period, it is void. There is no waiting to see if in fact it will vest. This is known as the “initial certainty” requirement.

Consider a devise in will ‘to A for life, remainder to the first of A’s children to marry’. If A is alive at the date of the testator’s death, the gift to A’s children is void. A is the life in being, and it is possible (even if not probably in the circumstances) that A’s children might marry more than 21 years after A’s death. This is true even if in fact one of A’s children in fact marries within 21 years of A’s death.

In the case of Re Wood 1894 2 Ch 310 a testator devised gravel pits to trustees which were to be worked until exhausted. The land was then to be sold and the proceeds divided between the testator’s issue living at that future time. It was expected that the pits would be exhausted within 4 years, but were in fact exhausted within 6 years. Even though both periods were well within the 21 year period (the testator is the life in being), the gift was void as it might be possible that the gravel pits would not be exhausted within 21 years.

There was also a conclusive presumption of fertility for the purposes of the rule. The result of this is that males and females are assumed to be capable of producing children even if aged 80 or 4. Assume there is a devise ‘to A for life, remainder to her first grandchild to attain 21’, and A is aged 90 at the time of the testator’s death. Despite this, A is assumed to be capable of bearing children and thus her children cannot be the lives in being, and the contingent gift is void.

Gifts to classes of people

By their nature, in a gift to a class of people the fractional share of each class member is not known until the total number of class members is certain. A class gift is one which is expressed to an uncertain number of people with some common characteristic. For example, a gift “to my grandchildren” is a class gift, as opposed to a gift “to my children A, B and C” which is a gift to a certain number of people in proportionate shares.

A class gift is therefore not vested for the purposes of the rule, until the fractional share of each member is known and each class member is known within the perpetuity period. If there is any possibility that the fractional share of any class member may not be known beyond the perpetuity period, then the gift fails entirely, even if some members are known. This is known as the “all or nothing” rule, as the gift cannot affect some members of a class but not others.

Entirely separate from the rule against perpetuities, the common law developed some rules which allowed a class gift to be closed artificially to allow executors or trustees to effectively administer their duties. These are rules of construction only, and can be excluded expressly. Compendiously they are referred to as the rule in Andrews v Partington (1971) 3 Bro CC 401. One effect of this rule is to sometimes validate or save a gift that would otherwise offend the rule against perpetuities.

The short summary of the rules is that a class capable of further increase will artificially close as soon as some member of the class becomes entitled to call for distribution of his or her share. Once the class is closed, the fractional share is known and is thus vested. The rule has expression in four situations:

  • A simple class gift: In a gift by will ‘to the children of A’: if A survivors the testator and also has some children then existing, the class closes so that the children then existing take to the exclusion of children born after.
  • A class gift with a contingency: In a gift by will ‘to the children of A who attain 21’, where A survives the testator, when the first child attains 21 the class closes and includes all children of A then existing who take to the exclusion of children born after.
  • A class gift without condition, but after a prior estate: In a gift by will ‘to A for life, remainder to the children of B’ and A survives the testator, at the time of A’s death and the termination of the life estate, if B is alive and there are children, the class closes and excludes children of B born after.
  • A class gift with a contingency, but after a prior estate: In a gift by will ‘to A for life, remainder to such of B’s children as attain 21’ and A and B survive the testator. If a child of B attains 21 before A’s death, the class closes upon A’s death and excludes children of B born after. If no child attains 21 and B survives the testator, the class remains open until the first child does in fact attain 21 and then closes.

Statutory modification of the rule

In many jurisdictions there are statutory modifications which try to ameliorate what is perceived to be the harshness of the rule. As these differ greatly from jurisdiction to jurisdiction it is impossible to go into them in detail.

Some common modifications include replacing the perpetuity period and the complex rules of ‘lives in being’ with a statutory fixed period of 80 or 90 years; rebutting the conclusive presumption of fertility for people aged above or below a certain age; replacing the “initial certainty” requirement with a “wait and see” rule; reducing the harshness of the “all or nothing” requirement by introducing more statutory class reduction rules to save a gift when possible.

Many of these changes are significant and allow the saving of a gift where it would otherwise be invalid under the common law rule.

Conclusion

The rule against perpetuities remains present in many jurisdictions (including, I think, the UK, though with statutory modification). Some apply the original common law rule, others have some have significant changes in statute. It remains an important consideration for trusts and in the law of succession, and also legal contingent remainders created inter vivos, and for anyone who wishes to tie up property with conditions for any significant length of time.

Most of the examples of gifts were taken from Land Law (referenced below).

References

  • Peter Butt, Land Law (5th ed), Lawbook Co., Sydney 2006
  • Butterworths, Halsbury’s Laws of Australia (at 30 January 2010), 310 Perpetuities and Accumulations
  • Samantha Hepburn, Australian Property Law Cases, Materials and Analysis, LexisNexis Butterworths, Sydney 2008

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