The Rule Against Perpetuities: common-law rule, exclusions, and statutory reform

Black-letter propositions

1. 01

   At common law, a nonvested interest is void unless it must vest, if at all, within 21 years after a life in being when the interest was created; even a remote possibility that it will vest later voids it, and the validating life may be a class only if the class is closed.

2. 02

   Vesting means the right has reached a known, verified individual, and the rule tests the interest at its creation, not by what later happens.

3. 03

   The Uniform Statutory Rule Against Perpetuities, as enacted in California Probate Code section 21205, keeps the common-law period as a first test and adds a wait-and-see test: a nonvested interest is valid if it is certain at creation to vest or terminate within 21 years after the death of an individual then alive, or if it actually vests or terminates within 90 years after creation.

4. 04

   Under the California statute, the possibility that a child will be born to an individual after that individual's death is disregarded, and an individual described as the spouse of a person alive at the start of the period is treated as alive when the interest is created, which removes the unborn widow problem.

5. 05

   A court must reform a disposition that would otherwise fail, on petition, to approximate the transferor's plan within 90 years, when an interest becomes invalid under the statute, when a class gift might become invalid and a member's share is about to take effect, or when an interest cannot vest within 90 years.

6. 06

   The statutory rule does not apply to nondonative transfers such as commercial arrangements, to fiduciary administrative powers, to an interest held by one charity or governmental body that follows an interest held by another, to qualified benefit plans, or to arrangements not subject to the common-law rule.

7. 07

   New York's rule, in EPTL 9-1.1, requires that an estate vest, if at all, not later than 21 years after one or more lives in being and any period of gestation involved, and it counts a child conceived before the creation of the estate but born after it as a life in being.

Use this attack sequence under time

Common wrong turns

• The common-law test looks at what could happen, not what does happen, but wait-and-see looks at what actually happens within 90 years.
• Only interests that are not vested at creation are tested, and a vested remainder or a reversion is not.
• Charity-to-charity and commercial interests are often outside the statutory rule, so check the exclusions before analyzing vesting.

Worked example

A trust gives land 'to my niece's first child to reach age 30,' and the niece has no children when the trust is created.

Practice this topic

The common-law rule

Cornell's Wex entry states the common-law rule as follows: if an interest in real property does not vest within 21 years of a life in being at the creation of the interest, the interest is not good. Vesting means that the right has reached a known, verified individual. The entry says a transfer violates the rule if there is even a remote possibility that no life in being would acquire the interest within the period, and that a measuring life may be a class of individuals only if the class is closed. It notes that many jurisdictions have modified the rule and some have abolished it.

New York's statute, EPTL 9-1.1, illustrates a codified version. Subdivision (b) says no estate is valid unless it must vest, if at all, not later than 21 years after one or more lives in being at the creation of the estate and any period of gestation involved, and subdivision (a) counts a child conceived before creation but born after it as a life in being. Subdivision (a) also addresses suspension of the absolute power of alienation, which it voids when it lasts longer than lives in being and 21 years.

The uniform statutory rule

California enacted the Uniform Statutory Rule Against Perpetuities, and Probate Code section 21201 says the statute supersedes the common-law rule. Section 21205 says a nonvested property interest is invalid unless, when it is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive, or it either vests or terminates within 90 years after its creation. Section 21208 disregards the possibility that a child will be born to an individual after the individual's death, and section 21231 treats a person described as the spouse of an individual alive at the start of the perpetuities period as alive when the interest is created.

Section 21220 directs a court, on petition, to reform a disposition in the manner that most closely approximates the transferor's manifested plan and is within the 90 years, when a nonvested interest becomes invalid, when a class gift might become invalid and a member's share is about to take effect, or when an interest cannot vest within 90 years.

What the statute leaves out

Section 21225 lists interests to which the wait-and-see rule does not apply. They include nonvested interests arising from nondonative transfers, with exceptions such as premarital and postmarital agreements and contracts to make a will, fiduciary administrative powers, an interest held by a charity or a government body that is preceded by an interest held by another charity or government body, and interests in pension, profit-sharing and similar employee benefit plans.

It also excludes property interests that were not subject to the common-law rule or are excluded by another statute. A practical consequence is that a question about a commercial option or a charity-to-charity gift must be analyzed for exclusion before any vesting analysis.

Frequently asked questions