Estates in Land: Estates and Future Interests IRAT

The Fee Simple (FSA)

The first estate we take up is the fee simple absolute

Characteristics of the fee simple

Heritability & Alienability 

Characteristic of Fee Simple: Heritability 

If O owns a parcel a land in fee simple, O’s heirs will (BLANK) the land when O dies if O does not leave a valid will

Characteristic of Fee Simple: Alienability

The property is able to be sold or transferred to another party without restriction

(BLANK) allows an owner of land in fee simple to own land that is freely transferable both during their lifetime and at death to their heirs

Words of limitations

Denotes what estate the grantor has given to someone

Words of purchase

Denotes who is the transferee of the grant

T or F: It’s not necessary to put words of inheritance (“and his heirs”) in a deed in any state

True

In 1600 O conveys Blackacre “to A for life, then to B forever.” What estates do A and B have? If A dies and then B dies, who owns Blackacre? Suppose the conveyance takes place in 2021?

A will own Blackacre until death and B will become the owner of Blackacre forever once A dies (or when conveyance occurs) in 2021. B’s heirs will then own Blackacre.

O conveys Greenacre “to A and her heirs.” A’s only child, B, is a spendthrift and runs up large, unpaid bills. B’s creditors can attach B’s property to satisfy their claims. Does B have an interest in Greenacre, reachable by B’s creditors? Suppose A wishes to sell Greenacre and use the proceeds to take a trip around the world. Can B prevent A from doing this?

No; A has a fee simple. B does not have a legal interest in the property. B has no interest in Greenacre that B's creditors can reach.

Judicial recognition of a life estate had two important consequences. What are they?

• It meant that the grantor of a life estate could control who takes the property at the life tenant’s death

• As land and stocks and bonds came to be viewed as income-producing capital, trust management for the life tenant developed

Create/Review case brief for Knopf v. Gray

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Freehold estates

Fee simple, the fee tail, and the life estate

Seisin

Possession of a particular kind and with peculiar consequences

Livery of seisin

Usually included both grantor and grantee going on the land and the grantor, before witnesses, delivering seisin to the grantee by some symbolic act such as handing over a clod of dirt or some stalks or putting the grantee’s hand on the ring of the door and uttering such words as “Know ye that I have given this land to (the grantee)”

• No longer important

Future interests

Confer rights to the enjoyment of property at a future time

Consider this simple example: Suppose that W, a woman married to H, has two adult children and no grandchildren (yet). She wishes to plan her estate so that upon her death all of the income from her assets, currently valued at approximately $750,000, and so much of her assets as H needs for his support, health, and maintenance will be paid to H for his life. Upon H’s death, all of W’s remaining assets are to go to her children.

What’s the best way to implement W’s plan?

The best way to implement W’s plan is through a trust. Using the trust form, W can give the trustee, a person or institution in whom she has confidence, the power to invest the trust principal and the discretion to pay the appropriate amount of principal to H. W’s will might provide that she devises her estate to a named trustee, in trust, with directions to pay all income and so much of the trust principal as H needs for his support, health, and maintenance to H for his life, providing further that upon H’s death the trust shall terminate and the trustee shall distribute all of the trust assets outright to W’s children. During the term of the trust the trustee holds the legal title to the trust assets in fee simple, subject to the beneficial interests of H and W’s children. H has a life estate, and W’s children have a remainder (more precisely, a vested remainder)

Future interests recognized in our legal system are:

• Interest retained by the transferor

• Interests created in a transferee

Future Interest retained by the transferor, known as…

• Reversion 

• Possibility of reverter 

• Right of entry (also known as power of termination)

Future Interests created in a transferee, known as:

• Vested remainder 

• Contingent remainder 

• Executory interest

What is future interest always attached to?

Some estate of the types considered in Chapter 4 (fee simple, life estate, etc.) 

Take this case: O conveys Blackacre to A for life, then to B and her heirs. B has present legal rights and liabilities. B can sell or give away her remainder. She can enjoin A from committing waste. She can sue third parties who are injuring the land.

What happens if B dies?

If B dies during the life of A, B’s remainder will be transmitted to B’s heirs or devisees, and a federal estate tax or state inheritance tax may be levied upon its value. Although a future interest does not entitle its owner to present possession, it is a presently existing interest that may become possessory in the future.

Reversion Definition

The interest left in an owner when he carves out of his estate a lesser estate and does not provide who is to take the property when the lesser estate expires

Precise Definition of Reversion

The interest remaining in the grantor, or in the successor in interest of a testator, who transfers a vested estate of a lesser quantum than that of the vested estate which he has

Hierarchy of estates determines what is a lesser state. What does the hierarchy look like?

Fee simple estates > Fee tail > Life estate > Term of Years

Consider this case: If O, owning a fee simple, creates a fee tail, a life estate, or a term of years, and does not at the same time convey away a vested remainder in fee simple, what happens?

O has a reversion. If A, owning only a life estate, creates a term of years, A has a reversion.

Because reversions result from the hierarchy of estates, they are thought of as…

The remnant of an estate that has not entirely passed away from the transferor

Practice 1

1. O owns a fee simple and makes the following transfers. In which cases is there a reversion?

   1. O conveys “to A for life, then to B and her heirs”

No reversion after a vested remainder in fee simple

Practice 2

1. O owns a fee simple and makes the following transfers. In which cases is there a reversion?

   1. O conveys “to A for life, then to B and the heirs of her body.”

A has life estate. B has fee tail. There is reversion

Practice 3

1. O owns a fee simple and makes the following transfers. In which cases is there a reversion?

   1. O conveys “to A for life, then to B and her heirs if B attains the age of 21 before A dies.” At the time of conveyance B is 15 yrs old. (If there is a reversion, what happens to it if B reaches 21 during A’s life?) 

1. A: life estate, B: contingent remainder in fee simple absolute (condition precedent if they turn 21). There is a reversion in O if the condition is not met. If B turns 21 during A's life, B's interest becomes vested and O's reversionary interest goes away.

Practice 4

1. O owns a fee simple and makes the following transfers. In which cases is there a reversion?

   1. O conveys “to A for 20 years”

A: not a freehold estate, O has a remainder

O conveys Blackacre “to A for life, then to B for life.” O subsequently dies with a will devising all of O’s property to C. Then A dies and B dies. Who owns Blackacre?

1. A: Life estate, B: vested remainder in life estate, C: reversionary interest in fee simple absolute

What is the difference between “fee simple absolute and “fee simple defeasible”

Limitations

Fee simple absolute: Complete and unrestricted ownership

Fee simple defeasible: Conditional ownership that can be revoked if specific condition is not met.

Vested Ramainders

1. Given to an ascertained person

2. Is not subject to a condition precedent

“Pur Autre Vie”

Transferred “for another life”

Future interest

A legal right to own property in the future

“Iner vivos”

In life

A remainder is contingent when any of the following applies:

• Condition precedent/stated event

• Unascertained persons

• Unborn persons