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The rule against perpetuities limits the creation of perpetual liens on property, requiring full ownership to be acquired within a certain time period. It was adopted in the 1600s to prevent wealth concentration and promote land use. The time period is historically 21 years and becomes complicated with contingencies. The rule is not observed uniformly in the US, with four states repealing it and others using a “wait and see” approach. The rule was repealed in Alaska, Idaho, New Jersey, and South Dakota due to tax advantages. 28 other states have adopted the uniform statutory rule against perpetuities.
The rule against perpetuities is a feature of English common law which requires that when a proprietary interest in a property is created, full ownership must be acquired within a certain period of time. Before its adoption in the 1600s, English landowners often bequeathed the use of their property to their heirs in their wills, who then left the use of the property to their heirs. This would continue for generations, bequeathing no actual title, so that the property could never be broken up or sold. This perpetual lien and control of the property long after the owner’s death is sometimes called “dead hand” or “mortmain” control. Like other death statutes, the rule against perpetuities limits this practice, partly because it tends to concentrate wealth in a small group of families, and partly because it can prevent land from being used in the best interests of the family.
The time period considered in the rule against perpetuities is historically 21 years and begins with the death of the “last identifiable person alive when the interest was created”. Thus, a landowner could leave the use of the marital estate to his spouse, with full rights transferring to the children upon her death, or when they reach the age of 21, without violating the rule. However, the rule becomes very complicated if we consider all the possible contingencies that could occur. In this same example, granting full entitlement to children upon reaching age 35 would violate the rule if the widow died before the children reached age 14.
In the United States, the rule against perpetuities is not observed uniformly in all 50 states. Four states have repealed it altogether, while other states observe a “wait and see” approach – that is, when the time period specified in the statute has been reached, if full title has been vested in a new owner, then the question is considered resolved; otherwise, the grant of interest is void and the title passes in accordance with the relevant statute. The reason for this wait-and-see approach, also called the “cy-pres doctrine”, is to try to follow the grantor’s intent as closely as possible.
The reason the rule was repealed in Alaska, Idaho, New Jersey, and South Dakota was because tax advantages favorable to perpetuities were created in the Tax Act of 1986. The uniform statutory rule against perpetuities has been adopted by 28 others States. This rule validates those unvested interests that actually accrue within 90 years of their creation, even if they would not accrue within the 21 years specified in the original rule.
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