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A Rule against Perpetuities for the Twenty-First Century
Abstract
The common law rule against perpetuities maintained alienation of property by voiding interests in property that did not vest within a life in being at the creation of the interest plus twenty-one years. The rule was applied strictly, often producing harsh results. The courts used a what-might-happen test to strike down nonvested interests that might not have vested in a timely manner. During the last half-century, many legislatures have softened the application of the rule against perpetuities by enacting wait-and-see provisions, which require courts to decide cases based on the facts as they actually developed, and reformation, which allowed some nonvested interests to be reformed to save them from invalidity. This paper describes the common law rule. Then it traces the modern developments, including promulgation of the widely adopted Uniform Statutory Rule Against Perpetuities, which includes an alternate 90 year fixed wait-and-see period to be applied in place of the common law's lives in being plus twenty-one years. The paper continues by exploring the policies which underlie the rule against perpetuities. Then, after finding that there is no significant movement to repeal the rule except for trusts, it is established that proposals for that federal law, including federal transfer taxes, cannot and should not be used to implement the policies served by the rule itself. There is a continuing need for state rules against perpetuities. The paper proposes that the rule be modified to make it more understandable and easier to apply. The proposed rule would replace lives in being plus twenty-one years with a fixed term of years. This would eliminate most of the difficulties encountered in application of the rule. Wait-and-see and reformation are part of the proposed rule. The proposed rule provides for determination of valid interests at the end of the fixed term of year Rule and contains a definition of "vested" to enable judges and attorneys to apply the rule in cases which will arise many years in the future.
In May 2007, the Supreme Judicial Court of Massachusetts held, as a matter of first impression, that the Rule Against Perpetuities did not bar the right of first refusal contained in a deed. Although this decision goes against the holdings of a majority of jurisdictions, there is a notable minority. This Note analyzes why the Supreme Judicial Court of Massachusetts reached a different decision than the higher courts of other states and suggests that future courts should follow the minority approach as Massachusetts has done. This Note takes the position that a right of first refusal should not be subject to the Rule Against Perpetuities. In determining whether a right-of-first-refusal provision is valid, the Rule Against Perpetuities should not be applied. Because a right of first refusal creates a contractual right and not a property interest, it is illogical to inquire into whether an interest created by a right of first refusal vests too remotely. Further, rights of first refusal do not necessarily render property inalienable. If a right-of-first-refusal provision contains language that may affect the alienability of the property, the right of first refusal should not be analyzed under the Rule Against Perpetuities. Instead, the Rule Against Restraints on Alienation should be applied. Rather than focusing on when the right of first refusal may vest, courts should focus on whether a right of first refusal acts as an unreasonable restraint on alienation.
Georgia should resist the urge to join the parade of states that have overturned the Rule Against Perpetuities. We do not neet the dynasty trust in Georgia. The repeal of perpetuities laws ignores the reasons for the Rule Against Perpetuities and uncritically assumes that preserving family wealth in perpetuity is a desirable social goal. The Rule is still needed to prevent persons long removed from the current scene from tying up wealth without restriction and from unduly influencing the behavior of those living in the present.
For background purposes, this Article reviews the legislative history of Georgia's Rule Against Perpetuities from 1863 to the present time, including the effect of enactment of the Uniform Statutory Rule Against Perpetuities (USRAP) in 1990. Uses of the GST exemption of dynasty trusts are described and their pros and cons considered and evaluated. Finally, this Article examines the contemporary policies served by the Rule, and the effect of perpetual dynasty trusts on society.
Kentucky Perpetuities Law Restated and Reformed, 49
- Jesse A Dukeminier
Jesse A. Dukeminier, Kentucky Perpetuities Law Restated and Reformed, 49 Ky. L. J.
1 (1960).
South Dakota and Wisconsin. See text at and notes 26 and 28, supra
- Idaho Alaska
- New Jersey
Alaska, Idaho, New Jersey, South Dakota and Wisconsin. See text at and notes 26 and
28, supra.
381
- E G Loretto V
420
E.g., Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).
Tennessee Gas Transmission Co., 314 S.W. 2d 193 (Ky
- Sorrell V
Sorrell v. Tennessee Gas Transmission Co., 314 S.W. 2d 193 (Ky. 1958).
The Uniform Statutory Rule Against Perpetuities: Ninety Years in Limbo, 34 UCLA L
- Jesse Dukeminier
Jesse Dukeminier, The Uniform Statutory Rule Against Perpetuities: Ninety Years in
Limbo, 34 UCLA L. Rev. 1023 (1987).
§521(a), which amended I.R.C. § 2010(c)
- Id
Id., §521(a), which amended I.R.C. § 2010(c).
); S.D. Codified Laws § 43- 5-1, supra note 28; and WIS
N.J.R.S. § 46:2F-10(a)(1) (Westlaw)(accessed February 5, 2006); S.D. Codified Laws § 43-
5-1, supra note 28; and WIS. STAT. ANN. § 700.16(1)(a), supra note 28.
382
IDAHO CODE ANN., § 55.111, supra note 28.
United States v. Causby, 328 U
419
E.g., United States v. Causby, 328 U.S. 256 (1946).
See, e.g Estate of Hendrickson, 736 A The Rule in Shelley's Case has been abrogated in all but a few United States jurisdictions
- Wolfe V Shelley
Wolfe v. Shelley, 1 Co. Rep. 93b, 76 Eng. Rep. 206 (1581). See, e.g., Sybert v. Sybert, 254 S.W.
2d 999(Texas 1953), Estate of Hendrickson, 736 A. 2d 540 (N.J. Super. 1999), and Society Nat'l
Bank v. Jacobson 560 N.E. 2d 217 (Ohio 1990). The Rule in Shelley's Case has been abrogated
in all but a few United States jurisdictions. 3 POWELL, REAL PROPERTY, supra note 46, at
§ 31.07[1].
577
Simes opposed wait-and-see. 580 Professor Jesse Dukeminier, a champion of comprehensive statutory reform, 581 strongly opposed the Uniform Statutory Rule's 90 year waitand-see period
- Professor Lewis
Professor Lewis M. Simes opposed wait-and-see. 580 Professor Jesse Dukeminier, a champion of
comprehensive statutory reform, 581 strongly opposed the Uniform Statutory Rule's 90 year waitand-see period. 582 There may be opposition to this proposal.
Killing the Rule, supra note 454, and Dukeminier and Krier, Perpetual Trust, supra note 34, at 1312 – 1313. 481 Congress is concerned about dynasty trusts
- See
- Bloom
See. e.g., Bloom, Killing the Rule, supra note 454, and Dukeminier and Krier,
Perpetual Trust, supra note 34, at 1312 – 1313.
481
Congress is concerned about dynasty trusts. See text at and note 35, supra.
§ 34.27.075, supra note 28
- Alaska Stat
ALASKA STAT. § 34.27.075, supra note 28; IDAHO CODE § 55-111, supra note
Deputy Assistant Secretary of the Treasury (Tax policy)
- J Michael
- Graetz
Michael J. Graetz, Deputy Assistant Secretary of the Treasury (Tax policy) to Lawrence J.
- Dennis V Bird
Dennis v. Bird, 941 S.W. 2d 486 (Ky. Ct. App. 1997).
Killing the Rule, supra note 454
- Bloom
Bloom, Killing the Rule, supra note 454, at 569.
186 S.W. 2d 896 (Ky. 1945), rehear. den 1945, further rehear. den. 1945. Smith v. Fowler, 190 S
- Ford V Yost
Ford v. Yost, 186 S.W. 2d 896 (Ky. 1945), rehear. den 1945, further rehear. den. 1945.
Smith v. Fowler, 190 S.W. 2d 1015 (Ky. 1946).
supra note 1, at § 29.02. See, e.g., Loveland v. CSX Transp. Co., 622 So
- Property Thompson
THOMPSON, PROPERTY, supra note 1, at § 29.02. See, e.g., Loveland v. CSX
Transp. Co., 622 So.2d 1120 (Fla. App. 1993).
The Death of the Life in Being
- John G See
- Note Shively
, supra note 37, at 2132. See, also, John G. Shively, Note, The
Death of the Life in Being, 78 Wash. U, L. Q. 371, 378-379 (2000) and Butler, Case for Repeal,
supra note 31.
376
Testing Perpetuities Reform, supra, note 410. For more detail, see text at notes
- Fellows
Fellows, Testing Perpetuities Reform, supra, note 410. For more detail, see text at
notes 410 – 415, supra.
488
- Farris Explosives
- Inc
Farris v. Laurel Explosives, Inc., 797 S.W. 2d 487 (Ky. Ct. App. 1993).
Western Savings & Loan co., 646 P. 2d 761 (UT 1982) and Smith v. Osguthorpe, 58 P
- Redd V
Redd v. Western Savings & Loan co., 646 P.
2d 761 (UT 1982) and Smith v. Osguthorpe, 58 P. 3d 854 (Ct. App. UT 2002).
Manierre v. Welling, 78 A. 507 (R.I. 1911); Bliven v. Borden
- See
See, e.g. Manierre v. Welling, 78 A. 507 (R.I. 1911); Bliven v. Borden, 185 A. 239
(R.I. 1936);
Restraints Upon The Alienation of Interests: I, 44 Yale L
- I Merrill
- Schnebley
Merrill I. Schnebley, Restraints Upon The Alienation of Interests: I, 44 Yale L.J. 961,
961 -962 (1935).
385
GRAY, PERPETUITIES, supra note 4, at § 2.1.
Spencer County Board of Education, 149 S
- Mcgaughey V
McGaughey v. Spencer County Board of Education, 149 S.W. 2d 519 (Ky. 1941).
Perpetuities: Three Essays in Honor of My Father
- Susan F French
Susan F. French, Perpetuities: Three Essays in Honor of My Father, 65 Wash. L. Rev.
Livingston County Board of Education
- Egner V
Egner v. Livingston County Board of Education, 230 S.W. 2d 448 (Ky. 1950).