Rule against perpetuities
The rule against perpetuities is a legal rule in the Anglo-American common law that prevents people from using legal instruments (usually a deed or a will) to exert control over the ownership of private property for a time long beyond the lives of people living at the time the instrument was written. Specifically, the rule forbids a person from creating future interests (traditionally contingent remainders and executory interests) in property that would vest beyond 21 years after the lifetimes of those living at the time of creation of the interest, often expressed as a “life in being plus twenty-one years”. In essence, the rule prevents a person from putting qualifications and criteria in a deed or a will that would continue to affect the ownership of property long after he or she has died, a concept often referred to as control by the "dead hand" or "mortmain".
The basic elements of the rule against perpetuities originated in England in the 17th century and were "crystallized" into a single rule in the 19th century. The rule's classic formulation was given in 1886 by the American legal scholar John Chipman Gray:
No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.— John Chipman Gray, Rule Against Perpetuities § 201.
The rule against perpetuities serves a number of purposes. First, English courts have long recognized that allowing owners to attach long-lasting contingencies to their property harms the ability of future generations to freely buy and sell the property, since few people would be willing to buy property that had unresolved issues regarding its ownership hanging over it. Second, judges often had concerns about the dead being able to impose excessive limitations on the ownership and use of property by those still living. For this reason, the rule only allows testators (will-makers) to put contingencies on ownership upon the following generation plus 21 years. Lastly, the rule against perpetuities was sometimes used to prevent very large, possibly aristocratic estates from being kept in one family for more than one or two generations at a time.
The rule also applies to options to acquire property. Often, one of the objectives of delaying the time of vesting is to avoid or reduce taxation of some sort. For example, a bequest in a will may be to one’s grandchildren, often with a life interest to one’s surviving spouse and then to the children, to avoid the payment of multiple death duties or inheritance taxes on the testator’s estate. The rule against perpetuities was one of the devices developed to at least limit this tax avoidance strategy.
|Part of the common law series|
|Estates in land|
|Future use control|
|Other common law areas|
Higher category: Law and Common law
The rule has its origin in the Duke of Norfolk's Case of 1682. That case concerned Henry, 22nd Earl of Arundel, who had tried to create a shifting executory limitation so that some of his property would pass to his eldest son (who was mentally deficient) and then to his second son, and other property would pass to his second son, but then to his fourth son. The estate plan also included provisions for shifting property many generations later if certain conditions should occur.
When his second son, Henry, succeeded to his elder brother's property, he did not want to pass the other property 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, 150 years later.
The rule against perpetuities is closely related to another doctrine in the common law of property, the rule against unreasonable restraints on alienation. Both stem from an underlying principle or reference in the common law disapproving of restraints on property rights. However, while a violation of the rule against perpetuities is also a violation of the rule against unreasonable restraints on alienation, the reciprocal is not true. As one has stated, "The rule against perpetuities is an ancient, but still vital, rule of property law intended to enhance marketability of property interests by limiting remoteness of vesting." For this reason, another court has declared that the provisions of the rule are predicated upon "public policy" and thus "constitute non-waivable, legal prohibitions.
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.
The rule does not apply to interests in the grantor himself. For example, the grant "For A so long as alcohol is not sold on the premises, then to B" would violate the rule as to B. However, the conveyance to B would be stricken, leaving "To A so long as alcohol is not sold on the premises." This would create a fee simple determinable in A, with a possibility of reverter in the grantor (or the grantor's heirs). The grant to B would be void as it is possible alcohol would be sold on the premises more than 21 years after the deaths of A, B, and the grantor. However, as the rule does not apply to grantors, the possibility of reverter in the grantor (or his heirs) would be valid.
Many jurisdictions have statutes that either cancel out the rule entirely or clarify it as to the period of time and persons affected:
- In England and Wales, dispositions of property subject to the rule before 14 July 1964 remain subject to the rule. The Perpetuities and Accumulations Act 1964 provides for the effect of the rule of interests created thereafter. The Perpetuities and Accumulations Act 2009 codified the "wait and see" doctrine developed by courts and made the perpetuity period 125 years.
- In Scotland there are similar provisions under the Trusts (Scotland) Act 1921.
- In the Republic of Ireland, the rule was abolished as of 1 December 2009.
- The states of the United States have differing approaches.
- Some states follow the "wait-and-see approach", or "second look doctrine", and/or apply the "cy près doctrine". Under the wait-and-see approach, the validity of a suspect future interest is determined on the basis of facts as they now exist at the end of the measuring life, and not at the time the interest was created. Under the cy près doctrine, if the interest does violate the rule against perpetuities, the court may reform the grant in a way that does not violate the rule and reduce any offensive age contingency to 21 years.
- Other states have adopted the Uniform Statutory Rule Against Perpetuities (or some variant of it) which extends the waiting period typically to 90 years after creation of the interest.[full citation needed]
- At least six states have repealed the rule in its entirety, and many have extended the vesting period of the wait-and-see approach for an extremely long period of time (in Florida, for example, up to 360 years for trusts).
- In Australia, each of the states has followed the UK approach to perpetuities, with statutory modification. In New South Wales, for example, the Perpetuities Act 1984 limits perpetuities to 80 years, but also adopts the "wait and see" approach.
Application in the United States
The rule against perpetuities is one of the most difficult topics encountered by law school students. It is notoriously difficult to apply properly: in 1961, the Supreme Court of California ruled that it was not legal malpractice for an attorney to draft a will that inadvertently violated the rule. In the United States, the common law rule has been abolished by statute in Alaska, Idaho, New Jersey, Pennsylvania, Kentucky, Rhode Island and South Dakota.
A new US Uniform Statutory Rule Against Perpetuities was published in 1986 that adopts the “wait-and-see approach” with a flat waiting period of 90 years in place of the rule of life in being plus 21 years. As of 2018[update], 31 jurisdictions have adopted the new rule: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Indiana, Kansas, Massachusetts, Minnesota, Montana, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Oregon, South Carolina, South Dakota, Tennessee, Utah, Virginia, Washington, and West Virginia, and the District of Columbia and the U.S. Virgin Islands. In 2015, the New York State Legislature considered whether or not to adopt the new rule.[dead link]
Other jurisdictions apply the cy-près doctrine, which validates contingent remainders and executory interests. Under certain circumstances, the traditional rule would have considered these remainders and interests to be void.
In 1919, lumber baron Wellington R. Burt died, leaving a will that specified that apart from small allowances, his estate was not to be distributed until 21 years after the death of the last of his grandchildren to be born in his lifetime. This condition was met in 2010, 21 years after his granddaughter Marion Landsill died in November 1989. After the heirs reached an agreement, the estate, which had reached an estimated value of between $100-110 million, was finally distributed in May 2011, 92 years after his death.
Real estate developer Henry G. Freeman established the Henry G. Freeman Jr. Pin Money Fund, which was intended to provide an annuity of $12,000 per year to the First Lady of the United States. Freeman died in 1917, but no presidential spouse received any payments from the fund until after Freeman's then-living descendants died out in 1989. Although Freeman's will stated that the payments were intended "to continue in force as long as this glorious government lasts", the trustees of the fund determined that maintaining the trust for more than 21 years after 1989 would violate the rule against perpetuities, and terminated the trust by agreement with then-First Lady Michelle Obama in 2010 to give the fund to charity instead. Hence, only four First Ladies ever received payments from the fund.
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 World Wildlife Fund" would be valid under the rule, because both parties are charities. Even though the interest of the fund 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. Also, if the original conveyance was "to John Smith and his heirs for as long as John Smith or his heirs do not use the premises to sell liquor, but if he does, then to the Red Cross" this would violate the rule because it could be more than 21 years before the interest in Red Cross would vest, and therefore, their interest is void. Thus leaving John with a fee simple determinable and the grantor a possibility of reverter.[clarification needed]
A famous actual example of this exception applies to Harvard's Widener Library. Eleanor Elkins Widener, the library's benefactor, stipulated that no “additions or alterations” could be made to the façade of the building. If the university ever changes the façade, it loses the building to the Boston Public Library. Because both Harvard and the Boston Public Library are charities, the restriction can apply indefinitely.
In order to satisfy the rule against perpetuities, 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, plus 21 years." To avoid problems caused by incorrectly drafted legal instruments, practitioners in some jurisdictions include a "saving 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 P. Kennedy (the father of John F. Kennedy), or John D. Rockefeller. Both designate well-known families with many descendants, and are consequently suitable for named, identifiable lives in being. For a time, it was popular to use a Royal lives clause, and make the term of a deed run until the last of the descendants of (for example) Queen Victoria now living dies plus 21 years.
Jurisdictions may limit usufruct periods. For example, if a corporation builds a ski slope, and gives rights of use (usufruct) as gifts to corporate partners, these cannot last in perpetuity, but must terminate after a period that must be specified, e.g. 10 years. A perpetual usufruct is thus forbidden and "perpetual" might mean a long, but finite period, such as 99 years. Here usufruct is distinct from a share, which may be held in perpetuity.
- Cestui que
- Cy-près doctrine
- Executory contract
- Executory interest
- Statutes of Mortmain
- Thellusson v Woodford
- Royal lives clause
- Merrill & Smith (2017), p. 567.
- Cited in Merrill & Smith (2017), p. 567.
- Merrill & Smith (2017), pp. 567–68.
- 3 Ch. Cas. 1, 22 Eng. Rep. 931 (Ch. 1682)
- 1 Cl. & Fin. 372, 6 Eng. Rep. 936 (H.L. 1832, 1833)
- "Cole v. Peters, 3 S.W.3d 846 | Casetext". casetext.com.
- Cole, 3 S.W.3d 846.
- Wedel v. American Elec. Power Service Corp., 681 N.E.2d 1122 (Ind.App. 1997). See also Matter of Estate of Kreuzer, 243 A.D.2d 207, 674 N.Y.S.2d 505 (N.Y.A.D. 3d Dept. 1998) (the law favors the vesting of estates as early as possibility).
- Symphony Space, Inc. v. Pergola Properties, Inc., 88 N.Y.2d 466, 669 N.E.2d 799 (N.Y. 1996).
- Black's Law Dictionary, Deluxe 8th Ed.
- "The Rules Against Perpetuities and Excessive Accumulations (LC251)" (PDF). Sixth Program of Law Reform: The Law of Trusts. Law Commission. 1998-03-31. Archived from the original (PDF) on 2008-03-15.
- "Land and Conveyancing Law Reform Act, No. 27 of 2009, section 16" (PDF).
- "Land and Conveyancing Law Reform Act 2009". Dublin: A&L Goodbody. 2009-07-22. Archived from the original on 2011-09-03. Retrieved 2009-12-14.
- "Wait-And-See Doctrine". TheFreeDictionary.com.
- "cy pres doctrine". TheFreeDictionary.com.
- Statutory Rule Against Perpetuities Summary
- "Statutes & Constitution: View Statutes: Online Sunshine". www.leg.state.fl.us.
- Perpetuities and Accumulations Act 1985 (ACT) s8(1); Perpetuities Act 1984 (NSW),s8; Perpetuities and Accumulations Act 1968 (Vic) s5; Property Law Act 1974 (Qld) s209; Perpetuities and Accumulations Act 1992 (Tas) s6(1); Property Law Act 1969 (WA) s103; Property Law Act (NT)
- The Perpetuities Act 1984 (NSW) s7.
- Belcher (1991), p. 46.
- Lucas v. Hamm, 56 Cal.2d 583, 15 Cal.Rptr. 821, 364 P.2d 685 (1961).
- For interests created on, or after, January 1, 2007. (20 Pa. Cons. Stat. § 6104)
- Kentucky Revised Statutes § 381.224.
- "34-11-38". webserver.rilin.state.ri.us. Retrieved 2019-09-19.
- Moynihan, Cornelius J.; Kurtz, Sheldon F. (2002). Introduction to the Law of Real Property (3rd ed.). Saint Paul, Minnesota: West Group. p. 248. ISBN 978-0-314-26031-4. OCLC 49800778.
- Uniform Law Commissioners, Uniform Statutory Rule Against Perpetuities
- "NY State Assembly Bill A1737". NY State Senate. October 3, 2015.
- "Uniform Law Commissioners, Legislative Fact Sheet - Statutory Rule Against Perpetuities".
- "Millionaire's heirs get inheritance after 92 yrs: Lumber baron Wellington R. Burt finally parts with his fortune, 21 years after his last grandkid died". CBS News. Saginaw, Michigan. Associated Press. May 8, 2011. Retrieved May 13, 2011.
- Zachary M. Seward, "Widener Library Bridge Coming Down, The Harvard Crimson, November 18, 2003; accessed 2017.03.07.
- McPhail v DoultonMcPhail v Doulton  AC 424
- Belcher, Jonathan (1991). "Virginia's Reform of the Common-Law Rule Against Perpetuities". Colonial Lawyer. 20 (1): 46–62.
- Merrill, Thomas W.; Smith, Henry E. (2017). Property: Principles and Policies. University Casebook Series (3rd ed.). St. Paul: Foundation Press. ISBN 978-1-62810-102-7.