Bar Exam Future Interests Review

Future interests and the Rule Against Perpetuities are perennial favorites on the bar exam, frequently appearing in the Property section. Mastering these concepts is not just about memorizing definitions; it's about developing a systematic analytical framework that allows you to dissect complex conveyances quickly and accurately under time pressure. Your ability to correctly classify interests and apply the rule can be the difference between passing and failing.

Understanding Future Interests: The Building Blocks

A future interest is a present, legally recognized right to possess property in the future. It exists from the moment a deed or will is effective, even though the right to possession is delayed. For bar exam purposes, you must distinguish between future interests retained by the grantor and those created in a grantee. The three most tested types are remainders, executory interests, and possibilities of reverter.

First, consider interests created in a grantee. A remainder is a future interest in a grantee that is capable of becoming possessory immediately upon the natural termination of a prior estate created in the same conveyance. Remainders can be either vested or contingent. A vested remainder has no conditions precedent to its possession other than the natural end of the prior estate, while a contingent remainder is subject to a condition precedent or given to an unascertained person. In contrast, an executory interest is a future interest in a grantee that cuts short or divests a prior estate before its natural termination. For example, "to A for life, then to B, but if B ever becomes a lawyer, to C" gives C an executory interest.

Second, interests retained by the grantor include the possibility of reverter. This future interest is automatically retained by a grantor when they convey a fee simple determinable estate. For instance, "to School District so long as the land is used for a school" creates a fee simple determinable in the School District and a possibility of reverter in the grantor. On the bar exam, you'll often need to identify this interest quickly, as it is exempt from the Rule Against Perpetuities.

The Rule Against Perpetuities: Purpose and Core Doctrine

The Rule Against Perpetuities (RAP) is a common law doctrine designed to prevent property from being tied up in uncertain ownership for too long. The modern formulation, which you must memorize, is: 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. The rule applies only to contingent remainders, executory interests, and options to purchase land; it does not apply to vested interests, possibilities of reverter, or rights of reentry.

The critical element is "vest." For RAP purposes, an interest vests when it becomes either a present possessory estate or a vested remainder—meaning it is given to an ascertained person and is not subject to a condition precedent. The "life in being" (or measuring life) can be any person alive at the creation of the interest who is relevant to the vesting condition. The "plus twenty-one years" accounts for a minor's gestation and majority. On the exam, you will apply the rule at the moment the instrument takes effect (e.g., at the grantor's death for a will) and must consider any possible scenario, no matter how unlikely, that could cause the interest to vest outside the period.

A Systematic Approach to RAP Analysis

To consistently solve RAP questions, adopt this four-step framework. First, identify the interest that is subject to the rule (e.g., a contingent remainder or executory interest). Second, determine the vesting event. What condition must occur for the interest to become vested? Third, list the relevant lives in being. These are individuals alive at the creation of the interest who could affect the vesting condition. Finally, test the worst-case scenario. Ask: "Is there any possible chain of events, however remote, where the interest could vest more than 21 years after the death of every relevant life in being?" If yes, the interest violates the rule and is void.

Apply this to a classic exam question: "O devises land 'to A for life, then to the first child of A to graduate from law school.'" At O's death, A is alive and has no children. The interest in A's first child to graduate is a contingent remainder (contingent on both birth and graduation). The relevant life in being is A. Now, test the scenario: A could die immediately, a child could be born posthumously, and that child might not graduate from law school until more than 21 years after A's death. That possible chain of events means the interest might not vest within the period, so it violates the RAP and is void.

Applying the Rule in Modern and Exam Contexts

Many jurisdictions have adopted statutory reforms to the common law RAP, such as the "wait-and-see" approach (which allows the interest to persist to see if it actually vests within the period) or a 90-year permissible period. However, for the bar exam, you must default to the strict common law rule unless the question explicitly states that a reform statute applies. Exam drafters love to test your ability to spot interests that are not subject to the rule, such as a vested remainder subject to open (held by a class where some members are ascertained) or the grantor-retained interests mentioned earlier.

When analyzing class gifts, remember the all-or-nothing rule: if any possible member of the class could take outside the perpetuities period, the entire class gift fails. For example, a gift "to the grandchildren of A" where A has living children at the creation of the interest might be valid if it is construed to include only grandchildren alive at A's death, but if it includes afterborn grandchildren, it likely violates the rule. Your analysis must be precise and methodical to avoid these traps.

Common Pitfalls

1. Confusing Vested and Contingent Remainders: A common error is mislabeling a remainder as vested when it still has a condition precedent. For instance, "to A for life, then to B if B reaches 25" creates a contingent remainder in B because reaching age 25 is a condition precedent. If B is 30 at the creation, the remainder is vested subject to divestment (if analyzed under some doctrines), but for RAP, it's crucial to check vesting at creation. Correction: Always ask, "At the moment the instrument takes effect, is the taker ascertained and is there no condition that must occur before the interest can become possessory?"

1. Misidentifying the Measuring Lives: Students often incorrectly limit the "life in being" to the person with the prior estate. The relevant lives can include anyone alive whose actions could influence vesting. In "to A for life, then to such of A's children as reach 25," the relevant lives are A and A's living children. Correction: List all individuals alive at creation who are mentioned in the vesting condition or who could potentially affect it.

1. Forgetting to Test All Possibilities: The most frequent RAP mistake is failing to consider far-fetched but legally possible scenarios. If an interest can possibly vest too remotely, it is void from the outset. Correction: After identifying the vesting condition, actively brainstorm the latest possible vesting event. For example, if vesting depends on marriage, consider that a person might marry at age 90, long after all relevant lives have died.

1. Applying RAP to Exempt Interests: A trap answer often involves applying the rule to a possibility of reverter or right of reentry, which are exempt. Correction: Before launching into RAP analysis, always confirm the interest is subject to the rule. Grantor-retained future interests and vested remainders are safe.

Summary

• Future interests like remainders, executory interests, and possibilities of reverter form the core of bar exam questions; precise classification is the first step to correct analysis.
• The Rule Against Perpetuities voids any contingent interest that might not vest within 21 years after the death of every life in being relevant to the vesting condition at the creation of the interest.
• Employ a systematic, four-step analysis for RAP: identify the interest, find the vesting event, list relevant lives, and test the worst-case possible scenario to determine validity.
• Remember that the common law rule is applied rigorously on exams; only contingent remainders, executory interests, and options are subject to it, while vested interests and grantor-retained interests are not.
• Avoid classic pitfalls by carefully distinguishing vested from contingent, broadly considering measuring lives, and testing all remote possibilities, not just likely ones.
• In class gifts, apply the all-or-nothing rule, and be prepared for questions that test your knowledge of statutory reforms by explicitly stating when they are in effect.