Estates And Future Interests Flow Chart

Navigating the complex world of property law often feels like traversing a dense forest. Estates and future interests, the legal concepts that dictate who owns what and when they own it, can be particularly daunting. To make sense of it all, a flow chart serves as an invaluable tool, providing a visual roadmap to unravel even the most intricate scenarios. This comprehensive guide explores the use of flow charts in understanding estates and future interests, offering clarity and practical application to this challenging area of law.

Decoding Estates in Land

At the heart of property law lies the concept of an estate, which essentially defines the degree, nature, and extent of ownership one holds in real property. Estates are classified based on their duration and the rights they confer. Understanding these fundamental categories is crucial before delving into the complexities of future interests.

• Fee Simple Absolute (FSA): This represents the highest form of ownership. The holder of an FSA possesses the property outright, with no limitations on its inheritability or transferability. It is perpetual and can be freely sold, gifted, or devised through a will.

• Defeasible Fees: Unlike the FSA, defeasible fees are subject to certain conditions. If these conditions are violated, the estate may be terminated, transferring ownership back to the grantor or a third party. There are three main types of defeasible fees:

  • Fee Simple Determinable (FSD): This estate automatically terminates upon the occurrence of a specified event. The language creating an FSD typically includes words of duration like "so long as," "while," or "until." Upon the event's occurrence, the estate reverts to the grantor or their heirs as a possibility of reverter.

  • Fee Simple Subject to Condition Subsequent (FSSCS): This estate is subject to a condition, but unlike an FSD, it does not automatically terminate upon the condition's violation. Instead, the grantor must take affirmative action to reclaim the property. The language creating an FSSCS usually includes phrases like "but if," "provided that," or "on the condition that." The grantor holds a right of entry (also known as a power of termination), which they must exercise to regain ownership.

  • Fee Simple Subject to Executory Limitation (FSSEL): This estate is similar to an FSSCS, but instead of reverting to the grantor, the property passes to a third party upon the condition's violation. This third party holds an executory interest.

• Life Estate: This estate lasts for the duration of a specific person's life, typically the grantee's. The life tenant has the right to possess and use the property during their lifetime, but they cannot commit waste that would diminish its value for future owners.

  • Ordinary Life Estate: Measured by the life of the grantee.

  • Life Estate Pur Autre Vie: Measured by the life of someone other than the grantee.

  • Upon the termination of a life estate, the property passes to either a remainderman (if designated in the original conveyance) or reverts to the grantor (if no remainderman is named). In the latter case, the grantor holds a reversion.

Unveiling Future Interests

Future interests represent the right to possess property at some point in the future. These interests are created simultaneously with a present estate and determine who will own the property after the present estate terminates. Future interests are categorized based on who holds the interest – the grantor or a third party.

Future Interests Retained by the Grantor:

• Possibility of Reverter: This arises when a grantor conveys a fee simple determinable. It is the possibility that the property will revert to the grantor if the condition attached to the FSD is violated.

• Right of Entry (Power of Termination): This arises when a grantor conveys a fee simple subject to condition subsequent. The grantor has the right, but not the obligation, to reclaim the property if the condition is violated.

• Reversion: This arises when a grantor conveys an estate of lesser duration than they possess, such as a life estate, and does not specify a remainderman. Upon the termination of the life estate, the property reverts to the grantor.

Future Interests in Transferees (Third Parties):

• Remainder: A remainder is a future interest held by a third party that is capable of becoming possessory immediately upon the natural termination of the preceding estate. Remainders are either vested or contingent.

  • Vested Remainder: A vested remainder is held by an identifiable person and is not subject to any condition precedent (other than the natural termination of the preceding estate). There are three types of vested remainders:

    • Indefeasibly Vested Remainder: The remainderman is certain to acquire the property in the future, with no conditions attached.

    • Vested Remainder Subject to Open: The remainder is vested in a class of people (e.g., "children") that may increase in size.

    • Vested Remainder Subject to Divestment: The remainderman's interest is vested, but it could be terminated by the occurrence of a subsequent condition.

  • Contingent Remainder: A contingent remainder is either held by an unascertained person or is subject to a condition precedent. The remainderman must satisfy the condition precedent in order to take possession of the property.

• Executory Interest: An executory interest is a future interest held by a third party that can only become possessory by divesting or cutting short a prior estate. Executory interests are not remainders because they do not wait for the natural termination of the preceding estate. There are two types of executory interests:

  • Shifting Executory Interest: Divests a prior grantee.

  • Springing Executory Interest: Divests the grantor.

Constructing the Estates and Future Interests Flow Chart

The beauty of a flow chart lies in its ability to break down complex decision-making processes into manageable steps. In the context of estates and future interests, a flow chart helps to systematically analyze a conveyance and identify the various estates and future interests created. Here's a step-by-step guide to constructing and utilizing such a flow chart:

Step 1: Start with the Granting Clause

The granting clause is the most important part of the deed or will, as it specifies what is being conveyed and to whom. Carefully examine the language used in the granting clause.

Step 2: Identify the Present Estate

• Is the conveyance perpetual and without limitations? If yes, it's likely a Fee Simple Absolute (FSA).
• Does the conveyance contain durational language (e.g., "so long as," "while," "until")? If yes, it's likely a Fee Simple Determinable (FSD). This creates a Possibility of Reverter in the grantor.
• Does the conveyance contain conditional language (e.g., "but if," "provided that," "on the condition that")? If yes, it's likely a Fee Simple Subject to Condition Subsequent (FSSCS). This creates a Right of Entry (Power of Termination) in the grantor.
• Does the conveyance contain conditional language that benefits a third party upon the occurrence of a condition? If yes, it's likely a Fee Simple Subject to Executory Limitation (FSSEL). This creates an Executory Interest in the third party.
• Does the conveyance specify a lifetime duration (e.g., "for life")? If yes, it's likely a Life Estate.

Step 3: Determine if there are Future Interests

If the grantor has conveyed less than a fee simple absolute, there will be a future interest. Determine whether the future interest is held by the grantor or a third party.

• If the grantor retains the future interest:

  • Possibility of Reverter: Associated with FSD.
  • Right of Entry (Power of Termination): Associated with FSSCS.
  • Reversion: Arises when the grantor conveys a life estate and does not specify a remainderman.

• If a third party holds the future interest:

  • Remainder:
    • Is the remainderman identifiable and is their taking possession not subject to any conditions precedent? If yes, it's a Vested Remainder.
      • Is the remainderman certain to acquire the property? If yes, it's an Indefeasibly Vested Remainder.
      • Is the remainder held by a class of people that may increase in size? If yes, it's a Vested Remainder Subject to Open.
      • Could the remainderman's interest be terminated by a subsequent condition? If yes, it's a Vested Remainder Subject to Divestment.
    • Is the remainderman unascertained or is their taking possession subject to a condition precedent? If yes, it's a Contingent Remainder.
  • Executory Interest: This interest divests a prior estate before its natural termination.
    • Does the interest divest a prior grantee? If yes, it's a Shifting Executory Interest.
    • Does the interest divest the grantor? If yes, it's a Springing Executory Interest.

Step 4: Apply the Rule Against Perpetuities (RAP)

The Rule Against Perpetuities (RAP) is a complex legal principle that prevents property from being tied up in trusts or contingent future interests for an unreasonably long period. The RAP states that an interest must vest (if it vests at all) no later than 21 years after the death of someone who is alive when the interest was created. The RAP primarily applies to contingent remainders and executory interests.

Step 5: Diagram the Estates and Future Interests

Visually represent the estates and future interests on a timeline or diagram. This helps to clarify the relationships between the different interests and their potential outcomes.

Sample Flow Chart Structure

While a flow chart can be customized to fit individual preferences, a basic structure might look like this:

1. Start: Analyze the Granting Clause
2. Present Estate?
   • Yes: What type? (FSA, FSD, FSSCS, FSSEL, Life Estate)
   • No: (Potentially an issue, re-examine the conveyance)
3. Future Interest?
   • Yes: Who holds it? (Grantor or Third Party)
   • No: (Likely an FSA)
4. Grantor's Future Interest?
   • Yes: (Possibility of Reverter, Right of Entry, Reversion) - Identify which applies.
   • No: Go to Third Party Future Interest
5. Third Party Future Interest?
   • Yes: (Remainder or Executory Interest)
6. Remainder?
   • Yes: (Vested or Contingent)
   • No: Executory Interest
7. Vested Remainder?
   • Yes: (Indefeasibly Vested, Subject to Open, Subject to Divestment) - Identify which applies.
   • No: Contingent Remainder
8. Executory Interest?
   • Yes: (Shifting or Springing) - Identify which applies.
   • No: (Error, Re-examine)
9. Apply the Rule Against Perpetuities (RAP) to Contingent Remainders and Executory Interests.
10. Diagram the interests.
11. End: Conclusion - You have identified all present and future interests.

Illustrative Examples

To solidify your understanding, let's examine a few examples and apply the flow chart methodology:

Example 1:

"To A, so long as the property is used for agricultural purposes."

• Present Estate: Fee Simple Determinable (FSD) in A. The language "so long as" indicates a durational limitation.
• Future Interest: Possibility of Reverter in the Grantor. If the property ceases to be used for agricultural purposes, it automatically reverts to the grantor.

Example 2:

"To B, but if B ever sells alcohol on the premises, the grantor has the right to re-enter and retake the property."

• Present Estate: Fee Simple Subject to Condition Subsequent (FSSCS) in B. The language "but if" indicates a condition subsequent.
• Future Interest: Right of Entry (Power of Termination) in the Grantor. The grantor has the option to reclaim the property if B violates the condition.

Example 3:

"To C for life, then to D if D is still living."

• Present Estate: Life Estate in C.
• Future Interest: Contingent Remainder in D. D's interest is contingent because it is subject to the condition precedent that D be living at the time of C's death. If D predeceases C, the property will not pass to D's heirs. If D is still alive when C dies, the interest becomes a fee simple absolute. There is a reversion in the grantor if D is not still living.

Example 4:

"To E for life, then to F's children." F has two children, G and H.

• Present Estate: Life Estate in E.
• Future Interest: Vested Remainder Subject to Open in G and H. The remainder is vested because G and H are identifiable and there is no condition precedent. However, it is subject to open because F could have more children, who would then join the class of remaindermen.

Example 5:

"To J, but if K graduates from law school, then to K."

• Present Estate: Fee Simple Subject to Executory Limitation (FSSEL) in J.
• Future Interest: Shifting Executory Interest in K. If K graduates from law school, K's interest will divest J of their estate.

Common Pitfalls and Considerations

While a flow chart is a valuable tool, it's important to be aware of common pitfalls and nuances in the law of estates and future interests:

• Ambiguous Language: Conveyances are not always clear and unambiguous. If the language is unclear, courts will often look to the grantor's intent to determine the type of estate and future interests created.
• The Rule Against Perpetuities (RAP): As mentioned earlier, the RAP can invalidate certain contingent future interests that could potentially vest too far in the future. It's crucial to analyze any contingent remainders or executory interests for RAP violations. Many jurisdictions have adopted "wait-and-see" or "cy pres" doctrines to mitigate the harshness of the RAP.
• State-Specific Laws: Property law is primarily governed by state law, so it's important to be aware of any specific rules or variations in the jurisdiction where the property is located.
• Destructibility of Contingent Remainders: Historically, contingent remainders were destroyed if they did not vest at or before the termination of the preceding life estate. However, this doctrine has been abolished in most jurisdictions.
• The Doctrine of Merger: If the same person acquires both the present estate and the next vested future interest in the same property, the two interests merge, and the lesser estate is extinguished.

The Benefits of Using a Flow Chart

Employing a flow chart to analyze estates and future interests offers numerous advantages:

• Clarity and Organization: Flow charts provide a visual representation of the decision-making process, making it easier to understand the relationships between different interests.
• Systematic Approach: The flow chart methodology forces you to systematically analyze the conveyance, ensuring that you don't overlook any important details.
• Problem-Solving: Flow charts can help you identify potential problems or ambiguities in the conveyance, allowing you to address them proactively.
• Efficiency: By following a structured process, you can analyze estates and future interests more efficiently and accurately.
• Educational Tool: Flow charts are an excellent learning tool for students and practitioners alike, helping to solidify their understanding of these complex legal concepts.

Conclusion

Estates and future interests can be a challenging area of property law, but with the aid of a well-constructed flow chart, you can navigate this complex landscape with greater confidence and clarity. By systematically analyzing the conveyance and applying the principles outlined in this guide, you can accurately identify the various estates and future interests created, ensuring that property rights are properly understood and protected. Remember to always consult with a qualified legal professional for advice on specific legal matters, as the application of these principles can vary depending on the jurisdiction and the specific facts of the case. The flow chart is a powerful tool, but it is not a substitute for sound legal judgment and expertise.