Learning Outcomes
After reading this article, you will be able to identify and distinguish between vested and contingent remainders in real property, apply the rules for class gifts, and determine how the Rule Against Perpetuities affects future interests. You will be able to analyze fact patterns to classify remainders and understand the consequences for conveyancing and exam questions.
MBE Syllabus
For MBE, you are required to understand the classification and consequences of future interests in real property. This article focuses on:
- Recognizing and defining remainders, including vested and contingent types.
- Applying the rules for class gifts and the “rule of convenience.”
- Understanding the effect of the Rule Against Perpetuities on remainders.
- Distinguishing remainders from executory interests and reversions.
- Identifying the consequences for conveyancing and marketable title.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
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Which of the following is a contingent remainder?
- "To A for life, then to B."
- "To A for life, then to B if B survives A."
- "To A for life, then to B's children."
- "To A for life, then to B and her heirs, but if B dies before A, to C."
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What is the effect of the Rule Against Perpetuities on a remainder to "A's children who reach 30" if A is alive and has one child aged 5?
- The remainder is valid.
- The remainder is void.
- The remainder is vested.
- The remainder is a reversion.
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Which of the following best describes a vested remainder subject to open?
- A remainder to a single ascertained person.
- A remainder to a class where at least one member is ascertained, but the class may expand.
- A remainder subject to a condition precedent.
- A remainder that divests a prior estate before its natural expiration.
Introduction
Remainders are a type of future interest in real property that become possessory, if at all, upon the natural termination of a prior estate, usually a life estate. Understanding the distinction between vested and contingent remainders is essential for MBE questions on conveyancing, marketable title, and the Rule Against Perpetuities.
Key Term: Remainder A future interest created in a transferee that becomes possessory, if at all, upon the natural expiration of a prior estate, and does not cut short the prior estate.
Types of Remainders
Remainders are classified as either vested or contingent, depending on the certainty of the person(s) who will take and the certainty of their right to possession.
Vested Remainders
A remainder is vested if it is given to an ascertained person and is not subject to any condition precedent other than the natural termination of the prior estate.
Key Term: Vested Remainder A remainder given to an identified person, not subject to a condition precedent, and certain to become possessory upon the end of the prior estate.
There are three main types of vested remainders:
- Indefeasibly vested remainder: Certain to become possessory and not subject to being divested or diminished.
- Vested remainder subject to open: Given to a class where at least one member is ascertained, but the class may expand (e.g., "to A for life, then to A's children," where A has one child but could have more).
- Vested remainder subject to total divestment: Vested in an ascertained person but subject to a condition subsequent that could divest the interest (e.g., "to A for life, then to B, but if B marries, to C").
Contingent Remainders
A remainder is contingent if it is either given to an unascertained person or is subject to a condition precedent (other than the natural termination of the prior estate).
Key Term: Contingent Remainder A remainder given to an unascertained person or subject to a condition precedent that must be satisfied before it becomes possessory.
Contingent remainders often arise in two situations:
- The remainder is given to a person not yet born or not yet identified (e.g., "to A for life, then to A's first child," when A has no children).
- The remainder is subject to a condition precedent (e.g., "to A for life, then to B if B survives A").
Class Gifts and the Rule of Convenience
When a remainder is given to a class (e.g., "to A for life, then to A's children"), special rules apply. The class closes when any member is entitled to possession, unless the grantor clearly states otherwise. This is known as the "rule of convenience."
Key Term: Rule of Convenience The principle that a class gift closes when any member of the class is entitled to immediate possession, preventing later-born members from sharing unless the grantor specifies otherwise.
The Rule Against Perpetuities and Remainders
The Rule Against Perpetuities (RAP) applies to contingent remainders and vested remainders subject to open. RAP requires that the interest must vest, if at all, no later than 21 years after the death of a relevant life in being at the time the interest was created.
Key Term: Rule Against Perpetuities The rule that no interest is valid unless it must vest, if at all, within 21 years after the death of a life in being at the creation of the interest.
If there is any possibility that a remainder might vest outside the perpetuities period, it is void from the outset.
Distinguishing Remainders from Other Future Interests
Remainders must follow a life estate or term of years and cannot cut short the prior estate. If a future interest divests or cuts short a prior estate, it is an executory interest, not a remainder.
Key Term: Executory Interest A future interest in a transferee that divests or cuts short a prior estate before its natural expiration.
Worked Example 1.1
O conveys "to A for life, then to B if B survives A." At the time of the conveyance, both A and B are alive.
Question: What type of remainder does B hold?
Answer: B holds a contingent remainder. B is ascertained, but the remainder is subject to the condition precedent that B must survive A.
Worked Example 1.2
O conveys "to A for life, then to A's children who reach 25." At the time of the conveyance, A is alive and has one child, C, aged 5.
Question: Is the remainder to A's children who reach 25 valid under the Rule Against Perpetuities?
Answer: No. The remainder is void under RAP because it is possible that A could have another child after the conveyance, and that child might not reach 25 until more than 21 years after A's death.
Worked Example 1.3
O conveys "to A for life, then to B's children." At the time of the conveyance, B has one child, D.
Question: What type of remainder do B's children hold?
Answer: B's children hold a vested remainder subject to open. D is ascertained, but the class (B's children) may expand if B has more children before A's death.
Exam Warning
Be careful: If a remainder is subject to a condition precedent or is given to an unascertained person, it is contingent—even if it seems likely to vest. Always check for conditions and ascertainability.
Revision Tip
When classifying a remainder, ask: (1) Is the person ascertained? (2) Is there a condition precedent? If either answer is "no," the remainder is contingent.
Key Point Checklist
This article has covered the following key knowledge points:
- Remainders are future interests that become possessory upon the natural termination of a prior estate.
- Vested remainders are given to ascertained persons and not subject to a condition precedent.
- Contingent remainders are given to unascertained persons or subject to a condition precedent.
- Class gifts close under the rule of convenience when any member is entitled to possession.
- The Rule Against Perpetuities applies to contingent remainders and vested remainders subject to open.
- Remainders cannot cut short a prior estate; if they do, they are executory interests.
Key Terms and Concepts
- Remainder
- Vested Remainder
- Contingent Remainder
- Rule of Convenience
- Rule Against Perpetuities
- Executory Interest
