I hesitate to write this, but I thought I’d do it anyway because some of the information above in other writeups is wrong, and the modern rule against perpetuities remains valid and relevant in many jurisdictions, even those that have modified its operation. And since I’m trying to put my notes in order I thought this was as good a time as any.
The term ‘rule against perpetuities’ usually now refers to what used to be known as the “modern” rule against perpetuities, as it is slightly newer than the ‘older’ rule against perpetuities also known as the rule in Whitby v Mitchell (1890) 44 Ch D. This rule is of historical interest only as it has been abolished in most jurisdictions. Very briefly, the rule in Whitby v Mitchell was that the grant of land to the issue of an unborn person was void.
The content of the rule
One formulation of the rule that is easy to read is the version put forward by Professor Peter Butt in Land Law, 5th ed, Lawbook Co., Sydney, 2006 at p162:
An interest limited to arise in the future is void from the outset unless it must vest (if it is to vest at all) within the perpetuity period. The perpetuity period is the period of a life, or lives in being at the date the instrument creating the interest comes into operation, plus a further 21 years (and if necessary, a gestation period for an unborn child).
The rule against perpetuities is a way the law has evolved to balance the interests of the present generation to control their property, and future generations to have certainty in interests of which they have a part of.
The rule against perpetuities is concerned with a possibility that the interest given to someone may possibly vest outside the perpetuity period. What this means requires a few explanations. An interest is ‘vested’ for the purpose of the rule if:
- All persons entitled to take an interest must be ascertained finally
- All conditions attached to the creation or transfer of interest have been met, and the interest is ready take effect subject to any prior interest.
- In the case where a gift is to a class of people, the fractional share of each person is ascertained and therefore the class of people is closed. This requirement is really a logical outcome of the first.
Suppose there is a gift in a will of land ‘to A for life, remainder in fee simple to B’ and testator is dead. The gift to A of a life estate satisfies all the above requirements and is vested in interest, and is also said to be vested in possession as A is entitled to possession as the owner of a freehold estate in land.
What is less intuitive is that the remainder in fee simple to B is also vested in interest. This is because it satisfies all three rules above. Though it is sometimes described as a ‘future’ interest, it is also a certain interest because B (or his heirs) will definitely take the fee simple upon A’s death. This means that this gift is not capable of offending the rule against perpetuities as both are vested upon the making of the gift.
As the rule is an expression of the common law’s abhorrence of uncertainty, it is important to remember that the rule is only concerned with the commencement, and not the duration of an interest. Thus the operation of the rule is often in judging the validity of contingent remainders (remainders that do not vest until a condition precedent is met) or powers of appointment under a trust.
Another example is a devise ‘to A for life, remainder to A’s eldest child when he attains 25’. The remainder in this case is contingent, and is not vested in interest for failure to meet requirement 2 above.
Life or lives in being
The life in being used to ascertain the perpetuity period can be designated expressly in the grant, or it can be implied if not expressly so designated. In practice they are usually beneficiaries, or people who can affect the condition attached to the gift. The life in being must be a human life, which is certain at the time of the gift, and if a class, then the class must not be capable of increase.
In order to extend the period as far as possible, sometimes a class of people are designated, with the interest expressed to vest 21 years after the death of the last surviving class member. This is leads to the practice of expressing a gift to vest after the death of the last lineal descendant of Queen Elizabeth II living at the time of the gift. Sometimes other notable people are used as well.
The implication of this is that in a devise by will of land ‘to my grandchildren’ will be valid. The lives in being are implied, and will be the testator’s children, whose children themselves must be born within the duration of their lives. However, a gift inter vivos in the same terms is not (prima facie, unless assisted by class closing rules) valid. This is because the life in being must be the testator’s, as the class of children can be increased. The law assumes that the class of children and therefore the class of grandchildren is capable of increase, and the interest might vest outside of the period of 21 years after the testator’s death.
Void from the outset
At common law, the rule against perpetuities is applied against possibilities at the time of the instrument creating the interest coming into operation, not probabilities or actual events during the perpetuity period. If an interest cannot be said to be certain to vest (if it vests at all) within the perpetuity period, it is void. There is no waiting to see if in fact it will vest. This is known as the “initial certainty” requirement.
Consider a devise in will ‘to A for life, remainder to the first of A’s children to marry’. If A is alive at the date of the testator’s death, the gift to A’s children is void. A is the life in being, and it is possible (even if not probably in the circumstances) that A’s children might marry more than 21 years after A’s death. This is true even if in fact one of A’s children in fact marries within 21 years of A’s death.
In the case of Re Wood 1894 2 Ch 310 a testator devised gravel pits to trustees which were to be worked until exhausted. The land was then to be sold and the proceeds divided between the testator’s issue living at that future time. It was expected that the pits would be exhausted within 4 years, but were in fact exhausted within 6 years. Even though both periods were well within the 21 year period (the testator is the life in being), the gift was void as it might be possible that the gravel pits would not be exhausted within 21 years.
There was also a conclusive presumption of fertility for the purposes of the rule. The result of this is that males and females are assumed to be capable of producing children even if aged 80 or 4. Assume there is a devise ‘to A for life, remainder to her first grandchild to attain 21’, and A is aged 90 at the time of the testator’s death. Despite this, A is assumed to be capable of bearing children and thus her children cannot be the lives in being, and the contingent gift is void.
Gifts to classes of people
By their nature, in a gift to a class of people the fractional share of each class member is not known until the total number of class members is certain. A class gift is one which is expressed to an uncertain number of people with some common characteristic. For example, a gift “to my grandchildren” is a class gift, as opposed to a gift “to my children A, B and C” which is a gift to a certain number of people in proportionate shares.
A class gift is therefore not vested for the purposes of the rule, until the fractional share of each member is known and each class member is known within the perpetuity period. If there is any possibility that the fractional share of any class member may not be known beyond the perpetuity period, then the gift fails entirely, even if some members are known. This is known as the “all or nothing” rule, as the gift cannot affect some members of a class but not others.
Entirely separate from the rule against perpetuities, the common law developed some rules which allowed a class gift to be closed artificially to allow executors or trustees to effectively administer their duties. These are rules of construction only, and can be excluded expressly. Compendiously they are referred to as the rule in Andrews v Partington (1971) 3 Bro CC 401. One effect of this rule is to sometimes validate or save a gift that would otherwise offend the rule against perpetuities.
The short summary of the rules is that a class capable of further increase will artificially close as soon as some member of the class becomes entitled to call for distribution of his or her share. Once the class is closed, the fractional share is known and is thus vested. The rule has expression in four situations:
- A simple class gift: In a gift by will ‘to the children of A’: if A survivors the testator and also has some children then existing, the class closes so that the children then existing take to the exclusion of children born after.
- A class gift with a contingency: In a gift by will ‘to the children of A who attain 21’, where A survives the testator, when the first child attains 21 the class closes and includes all children of A then existing who take to the exclusion of children born after.
A class gift without condition, but after a prior estate: In a gift by will ‘to A for life, remainder to the children of B’ and A survives the testator, at the time of A’s death and the termination of the life estate, if B is alive and there are children, the class closes and excludes children of B born after.
- A class gift with a contingency, but after a prior estate: In a gift by will ‘to A for life, remainder to such of B’s children as attain 21’ and A and B survive the testator. If a child of B attains 21 before A’s death, the class closes upon A’s death and excludes children of B born after. If no child attains 21 and B survives the testator, the class remains open until the first child does in fact attain 21 and then closes.
Statutory modification of the rule
In many jurisdictions there are statutory modifications which try to ameliorate what is perceived to be the harshness of the rule. As these differ greatly from jurisdiction to jurisdiction it is impossible to go into them in detail.
Some common modifications include replacing the perpetuity period and the complex rules of ‘lives in being’ with a statutory fixed period of 80 or 90 years; rebutting the conclusive presumption of fertility for people aged above or below a certain age; replacing the “initial certainty” requirement with a “wait and see” rule; reducing the harshness of the “all or nothing” requirement by introducing more statutory class reduction rules to save a gift when possible.
Many of these changes are significant and allow the saving of a gift where it would otherwise be invalid under the common law rule.
The rule against perpetuities remains present in many jurisdictions (including, I think, the UK, though with statutory modification). Some apply the original common law rule, others have some have significant changes in statute. It remains an important consideration for trusts and in the law of succession, and also legal contingent remainders created inter vivos, and for anyone who wishes to tie up property with conditions for any significant length of time.
Most of the examples of gifts were taken from Land Law (referenced below).
- Peter Butt, Land Law (5th ed), Lawbook Co., Sydney 2006
- Butterworths, Halsbury’s Laws of Australia (at 30 January 2010), 310 Perpetuities and Accumulations
- Samantha Hepburn, Australian Property Law Cases, Materials and Analysis, LexisNexis Butterworths, Sydney 2008