The rule against perpetuities is in essence a time limitation. It applies to transfers of property, whether through a will or a sale or gift of property from one owner to another. The rule also applies to trusts.
It prohibits a contingent grant of property or bequest of property in a will, if the final vesting of ownership is dependent on some event that might not occur within a certain period of time. In this context, the word “vest” means acquiring the right of present or future enjoyment of an interest in property, such as the right of unconditional ownership.
Traditionally, the rule against perpetuities is expressed as follows, “No interest is good unless it must vest, if at all, no later than 21 years after some life in being at the creation of the interest.”
In other words, if a person grants or bequeaths their property to another person and full ownership of the property depends on some future event or occurrence, that event or occurrence MUST happen within a specified period of time. If the event would not occur, and some interest in property would not vest, within the specified period of time, the grant or bequest is void.
The goal of the rule against perpetuities is to prevent people from using legal instruments, such as a deed, trust document or a will, to exert control over the ownership of property for a time long beyond the life spans of people living at the time the instrument is written. Specifically, the rule forbids a person from creating future interests in property that would vest at a time beyond 21 years after the lifetimes of those living at the time the interest is created. This awkward concept is often expressed as a “life in being plus twenty-one years.” The “life in being” is any person who is alive at the time the legal instrument that creates the interest is written.
For example, suppose A grants to B and his heirs a convenience store,”so long as liquor is sold on the premises, otherwise the store shall return to A and his heirs and descendants.”
A’s grant of the store is contingent on the store continuing to sell alcohol. However, there is no guarantee that the store will always be used to sell alcohol. It is possible that 100 years from the time of the grant, one of B’s great great grandchildren could choose to abandon alcohol sales altogether. Consequently, because the condition on A’s grant could potentially exist forever, or in perpetuity, it violates the rule against perpetuities. For that reason, it is void.
Why Does the Rule Against Perpetuities Exist?
A grant such as that of A in the example above would always cloud title to the convenience store, because A or A’s descendants might possibly reclaim ownership of the property at any time that liquor ceases to be sold in the store. The rule against perpetuities is a way for courts to avoid these endless uncertainties. The rule imposes a time limit on grants such as the one made by A.
If one thinks about the example, one can appreciate how impractical it would be for the grant to be valid and enforceable. Some distant offspring of A could try to reclaim ownership of the store that had not been in A’s family for decades, if some distant descendant of B were to stop selling alcohol in the store. This is simply not practical.
What Is the Time Limit for the Rule Against Perpetuities?
The rule against perpetuities has a long history that dates back to 17th century England. In the present age, it is considered difficult to grasp and apply in practice. Notably, 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 against perpetuities.
The rule against perpetuities has been abolished by statute in Alaska, Idaho, New Jersey, Pennsylvania, Kentucky, Rhode Island and South Dakota. A new, improved rule against perpetuities was proposed in 1986. It offered a fixed waiting period of 90 years in place of the rule of a life in being plus 21 years.
As of 2018, the following 31 states had 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,
- West Virginia,
- Washington, D.C.;
- The U.S. Virgin Islands.
Other jurisdictions apply the colorfully named cy pres doctrine, which applies especially to charitable trusts that might otherwise be prohibited by the rule against perpetuities. The traditional rule against perpetuities would make some charitable trusts void or make them unable to be altered even if circumstances suggested that alteration is necessary. The cy pres doctrine makes them valid.
For example, the cy pres doctrine was critical in allowing a court in Pennsylvania to revamp the terms of the charitable trust and the foundation established by Dr. Albert Barnes, so that his world-famous collection of impressionist, post-impressionist, and early modern paintings could be moved to a new, more appropriate location in Philadelphia.
The fact that many states have abolished the rule against perpetuities means that certain types of trusts can be set up. They are trust that would violate the rule if it were in effect. For example, some states allow so-called “dynasty trusts” which can conceivably last for very long periods of time. Whether it is possible in any given state depends on state law.
The time limit under the rule against perpetuities requires that a grant of property lose its contingency no more than 21 years after a life in being after the time it was made. Again, “life in being” in this case means any person who was alive at the time that the grant was made and who has an interest in the property in question. Once everyone alive at the time of the grant has died, the 21 year countdown begins. After 21 years, if the transfer were to remain contingent on a future event, it would violate the rule against perpetuities, so it cannot be valid. As a practical matter, this means that courts would not enforce it.
For example, suppose X gives Y and Y’s descendants a theme park, “as long as cherry trees grow in the park.” Now imagine that 200 years later, Y’s descendant, Z, could cut down all the cherry trees for new development of the park. Although this scenario seems far-fetched, it is a possibility. The possibility effectively voids X’s grant to Y from its inception.
How Can a Lawyer Help Me?
If you are thinking of making any type of grant, bequest or trust that involves contingencies extending far into the future, you should consult an experienced lawyer. If you are thinking about selling or making a gift of property with contingencies, you should consult a real property lawyer.
If you are planning a will or a trust, you want to consult an estate planning lawyer. The rule against perpetuities requires the use of very particular language when making transfers of property, or drafting wills or trust documents. An attorney near you experienced in estate planning can make sure your transfers of property, wills and trusts comply with the rule against perpetuities if it is in effect in your state.
