LexisNexis® CLE On-Demand features premium content from partners like American Law Institute Continuing Legal Education and Pozner & Dodd. Choose from a broad listing of topics suited for law firms, corporate legal departments, and government entities. Individual courses and subscriptions available.
By Jennifer F. Hillman, Esq.
Against Perpetuities is an often misunderstood rule which strikes panic in the
hearts of many law students and practitioners alike. Simply put, the rule
limits the ability of owners to control future dispositions of their property.
Under NY EPTL 9-1.1(a), any present or future interest is void if
it extends the absolute power of alienation for a period beyond "lives in
being" at the creation of the estate, plus 21 years. The rule solely applies to
interests that do not vest within that time frame. Thus,
in a trust created with income to X for life, and remainder to Y, Y's interest
is vested and determinable upon creation of the trust and does not violate the
rule. However, a trust wherein X gives income to "his children" for life, and
the remainder to "his grandchildren," the remainder interest is invalid because
it only vests if all of the grandchildren were born within lives in being (at
the time the trust was created) plus 21 years. See Turano, McKinney's Practice Commentaries NY EPTL § 9-1.1. X
could have had a child after the creation of the trust but prior to his death,
and then his after-born child could give birth to a grandchild more than 21
years later. The interest could vest too remotely, so it is
case out of the Kings County Surrogate's Court, Matter of Mandel, N.Y.L.J., May 3, 2012, at 21, col. 3 highlights practitioners'
continued misunderstanding of the rule against perpetuities. Mandel addressed a testamentary trust
where the trustee attempted to terminate the trust for failure to comply with
the rule, along with other challenges. The trust, created in 1945, divided a
portion of the decedent's residuary estate into seven equal parts, one for each
of his children. The trust provided that each part be held in trust for the
benefit of the children until the death of the child, or another designated
second measuring life. The second measuring life of each sub-trust was either a
named grandchild of the decedent or another named individual whose relationship
was unknown - each of whom was a "life in being" at the time the trust was
created. Upon the death of any child, the trust continued during the lifetime
of the secondary measuring lives, with the monthly annuity payments being made
to his or her issue.
trustee sought to terminate the trust as violative of the Rule Against
Perpetuities because it failed to provide for the distribution of the remainder
of any sub-trust once terminated. The Court noted that this argument was based
upon the "faulty assumption" that the failure to expressly provide for the
distribution of the remainder interest upon termination results in no one being
entitled to the remainder interest.
have been consistently construed as providing that any remainder existing upon
termination of the trust pass to the annuitant or his beneficiaries whether by
will or intestacy. This is because the testator often assumes in creating an
annuity trust that the trust would be depleted before it terminates. In
construing the trust provisions, the Court determined that the principal and
unexpended income at the termination of each sub-trust would be distributed to
the grandchildren of the designated child, and the issue of the pre-deceased
grandchildren surviving at the termination of the sub-trust, per stirpes. Even
if the will was not construed in that manner, the testator's failure to provide
for a taker of the remainder interest upon termination would result in the
remainder interest passing to the testator's intestate heirs.
Regardless, the Court determined that there was no gap in
alienability or vesting. Each sub-trust must end and be distributed within two
lives in being at the death of the decedent, and thus the Rule Against
Perpetuities was not violated. The interests vested within the appropriate time
frame, even if the distribution of the remainder of the interest upon
termination of the trust was not specifically stated.
Jennifer F. Hillman is an attorney at Ruskin, Moscou
Faltischek, P.C., Uniondale, New York where her practice focuses in the area of
trust and estate litigation. She can be reached at email@example.com
Sign in with your Lexis.com ID to access LEXIS.com Estates, Gifts & Trusts and Elder Law resources
Discover the features and benefits of LexisNexis® Tax Center
View the LexisNexis
Catalog of Legal and Professional Publications
here for a list of available LexisNexis eBooks.
Click here to learn more about
For more information about LexisNexis products and solutions connect with us through our corporate site.