IV.

System of Estates
Future Interests When FSA Grantee dies, property goes to: (1) Grantees devisees in her will; then (2) Grantees heirs via states intestacy statute; then (3) Escheats to State where property is located. Steps in Classifying Interests 1) Read the exact language carefully. 2) Analyze the interest in sequence. OA ________, then to B _________ . Then ask if O kept anything? 3) Ask who has the present right of possession and what is the duration? 4) Ask who holds any future interest, the transferor or a transferee? 5) Ask how does any F/I in a transferee become possessory does it wait patiently or cut short the prior estate? 6) If a remainder is vested, ask what type of vested remainder it is. Present Possessory Estates 1) Fee Simple may last forever, but some fee simples are guaranteed to last forever 2) Fee Tail lasts until a line of descendants run out 3) Life Estate lasts for a persons life 4) Leasehold lasts for a period of time measured by the calendar *Modern law assumes that Life Estates can terminate before Life tenants dies if LT: (1) renounces itjust doesnt want the gift; (2) commits extreme waste; or (3) forfeiture.

Kinds of Defeasible fees 1) FSD possibility of reverter retained by transferor 2) FSSCS right of entry (power of termination) retained by transferor 3) FSSEL executory interest created in transferee -no classic words to create -ends automatically upon stated event -versus FSD and FSSCS whose F/I are created in transferor *FSCS v. FSD When in doubt, Cts prefer FSCS. FUTURE INTERESTS present interest that entitles person to possession in the future; F/I are transferrable and devisable.

F/I retained by the Transferor = (a) Reversion F/I retained by O who transfers a vested estate of a lesser quantum (usually non-Fee Simple) than he has; or a contingent estate of the same quantum (b) Possibility of reverter - FSD (c) Right of entry/re-entry (power of termination) - FSSCS F/I created in a Transferee = (a) Vested remainder 3 types (b) Contingent remainder (c) Executory interest *Future interests are transferrable and devisable. -Rule for Reversions = No reversion if O transfers a: Possessory fee simple; or Vested remainder in fee simple. Classic examples of when O retains a Reversion = [Ex 1] OA for life. O or Os successor has a reversion in fs that is certain to become possessory after As life estate. [Ex 2] OA for life, then to B and her heirs if B survives A. O has a reversion in fs that is not certain to become possessory. If B dies before A, O will be entitled to possession at As death. On the other hand, if A dies before B, Os reversion is divested on As death and will never become possessory. Steps in classifying remainders = First determine whether remainder is vested or not. Then determine the type of vested remainder. Vested vs. Contingent remainders = Vested = Given to an ascertained person; not subject to a CP other than natural termination of preceding estate Contingent = given to unascertained person; made contingent upon some event other than natural termination of prior estate; Types of vested remainders = (a) Indefeasibly vested remainder certain to become possessory Ex: O A for life, then to B and her heirs B has an indefeasibly vested remainder certain to become possessory upon termination of As life estate. (b) Vested remainder subject to open (subject to partial divestment) created in a class of persons to which others may be added

Ex: OA for life, then to As children and their heirs. A has one child, B. B has a vested remainder subject to open to let in later-born children. Bs exact share cannot be known until A dies. The law assumes A can have children no matter what age A is. If A has no child at the time of conveyance, the remainder is contingent bc no taker is ascertained. (c) Vested remainder subject to divestment followed by words stating a condition subsequent. Ex: OA for life, then to B and her heirs, but if B does not survive A, to C and her heirs. -B has a vr in fee simple subject to divestment. Comma to Comma looking at Bs interest there is no Condition Precedent (there is a condition after/subsequent to the description of Bs interest). -C has a shifting executory interest which can become possessory only by divesting Bs remainder. Remainder examples (vested or contingent?) = Ex: OA for life, then to As issue, and if A dies without issue surviving A then to B. First situation: At the time of conveyance, A is alive and has never had children. *For conveyances, all issues have equal shares no matter what generation they are (children = grandchildren = great grandchildren), unlike Intestacy statutes. A: life estate As issue: unascertained bc they are unborn, they have a contingent remainder in fee simple B: Bs interest comma to comma goes from and if A dies..to B, thus B has a contingent remainder in fee simple bc it is subject to a condition precedent (CP = A dying without surviving issue) O: reversion (bc we assume As Life estate could end before A dies. Analyze at the time of conveyance.) See bottom of p. 231 for explanation. Second situation: A has one grandchild G. A: life estate G: vested remainder subject to open and subject to divestment (bc G might die before A) B: executory interest (bc cuts short Gs interest bc G is the one issue) O: has nothing

Rule for identifying Executory interests = A remainder can never follow a vested fee simple, vested either in possession or in a remainder.

Therefore, an interest in a transferee which does so is an executory interest. Ex: Omy son A, but when my grandchild B graduates from law school to her. What interests are created? A: FSSEL (bc it is an FSA followed by a future interest in a transferee) B: executory interest (we know this from applying the rule above = A remainder can never follow a vested fee simple, vested either in possession or in a remainder. Therefore, an interest in a transferee which does so is an executory interest.) O: nothing When B dies and it is clear he has no chance of going to law school anymore, As interest turns into a FSA.