vesting(redirected from Vesting schedule)
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Rule against Perpetuities
Under the Common Law, the principle that no interest in property is valid unless it vests not later than twenty-one years, plus the period of gestation, after some life or lives in being which exist at the time of the creation of the interest.
The courts developed the rule during the seventeenth century in order to restrict a person's power to control perpetually the ownership and possession of his or her property after death and to ensure the transferability of property. The rule includes the period of gestation to cover cases of posthumous birth.
A property interest vests when it is given to a person in being (someone who is currently living) and is not subject to a condition precedent. For example, if Donald Smith transfers his real property to his son Howard for life and then to Howard's children who are alive at the time of Howard's death, the children's interest is not vested. Their interest is subject to the condition precedent that they survive their father Howard. If Donald transfers his property to his son Howard for life, and then to Howard's children Ann and Richard, the children's interest is vested. Although the children's right to possess and enjoy the property might be delayed for many years, the rule does not relate to the time when property vests in actual possession but only when the property vests in interest. The interest that the children possess is known as a future interest.
Under the rule, a future interest must vest within a certain period of time. This period is limited to the duration of a life or lives in being (the "measuring lives") at the time the interest in the property is transferred, plus twenty-one years.
The period of the rule can be extended by one or more gestation periods. For purposes of the rule against perpetuities, a person is in being at the time of conception if he or she is born thereafter. Therefore the measuring life, or lives, might be the life of a person who has been conceived at the time the instrument takes effect but who is born afterward. For example, a testator—one who makes a will—leaves property "to the descendants of Jones who are living twenty-one years after the death of my last surviving child." Six months after his death, the testator's wife gives birth to their only child. This child is the measuring life, and the descendants of Jones who are alive twenty-one years after the death of the testator's child will take the property.The period of gestation can also occur at the end of the measuring life or lives. A person conceived before but born after the death of a measuring life is considered to be in being for purposes of the rule. For example, a testator leaves his estate to his grandchildren who attain the age of twenty-one. The testator's only child, William, is born six months after the testator's death. William himself has only one child, Pamela, who is born six months after William's death. The will provisions that leave the property to Pamela are valid, and she will inherit her grandfather's estate when she reaches twenty-one.
The twenty-one year period must be added on after the deaths of the persons or person who are used as the measuring lives.
The measuring lives, or life, are usually persons who are named in the instrument creating the future interest, such as a will or a trust. Frequently the person whose life is used as the measuring life also has a preceding interest in the property, such as a person who is given life estate. A large number of persons can be used as measuring lives, as long as the date of the last survivor's death can be learned without too much difficulty. For example, a bequest by a testator who used as measuring lives all of Queen Victoria's lineal descendants living at the time of the testator's death was upheld as valid. On the date of the testator's death, 120 of the queen's lineal descendants were alive.
If the interest will not vest until after the expiration of the life or lives in being plus twenty-one years, or there is a possibility that the interest might not vest until after the expiration of such time, the transfer is void and fails completely. The following fact pattern is an example of a situation that would violate the rule. George Bennet owns a farm, and his son Glen and Glen's wife, Susan, live on the farm and help George manage it. Glen and Susan are childless, but George wants grandchildren. To encourage them to have children, George promises that he will give Glen a life estate in the farm and leave the remainder to George's grandchildren. He executes a will devising the farm to Glen for life and then to Glen's children when they reach the age of twenty-five. George's will creates the future interest, which takes effect at the time of his death. Glen's is the measuring life—the life in being at the time the interest is created. Since it is possible for the vesting to occur more than twenty-one years after the deaths of Glen and Susan, the devise of the future interest to the grandchildren is void. For instance, one year after George's death, Susan has a baby girl. Two years later, she has twin boys. Six months after the birth of the twin boys, both Susan and Glen are killed in an automobile accident. The interest in the farm will not vest in the three children within twenty-one years after their parent's deaths.
Wait and See Statutes
Under the common-law rule, if there is a possibility that the future interest will not vest until after the expiration of the life or lives in being, plus twenty-one years, the interest is void. The determination is made at the time the future interest is created. In order to avoid the harshness of this rule, some states have enacted statutes providing that the validity of the interest is to be decided at the time the interest actually does vest, rather than at the time it is created. Under these statutes the courts "wait and see" if the interest does in fact vest within the period of the rule. If it does vest within the period of the life or lives in being plus twenty-one years, then the interest is valid. Under other more limited "wait and see" statutes, a decision is made at the time of the death of the life tenant or tenants. These statutes are also called second look statutes.
Dobris, Joel C. 2000. "The Death of the Rule Against Perpetuities, or the RAP Has No Friends—An Essay." Real Property, Probate and Trust Journal 35 (fall): 601–65.
"Dynasty Trusts and the Rule Against Perpetuities." 2003. Harvard Law Review 116 (June): 2588–2609.
Gray, John Chipman. 2003. The Rule Against Perpetuities. Union, N.J.: Lawbook Exchange.
vestingthe process whereby a right to or interest in property becomes the subject of entitlement by someone. If an interest vests in possession, the holder will become entitled to the immediate possession thereof; if it vests in interest, this signifies the existence of a prior interest that requires to be satisfied before possession can be assumed.
In Scotland, vesting subject to defeasance refers to conditional bequests where the condition is resolutive and not suspensive. It is most commonly encountered where a testator makes a bequest that is conditional only upon the possible birth of a child, in which case, if the doctrine applies, the condition is ignored but may later be defeated by the happening of the event.