Friday, May 13, 2011

Dead Hands and Trusts

The centuries-old common law Rule Against Perpetuities (RAP) is alive and well in the 21st century as seen in a recent case in Michigan which settled the disposition of the estate of lumber baron Wellington Burt, once one of the eight wealthiest Americans. Burt died 92 years ago in 1919. Saginaw County Chief Probate Judge Patrick McGraw called the case "one of the most complicated research projects" in his 12 years on the bench. After hours of research and years of patience, heirs of the lumber baron, ranging from 19 to 94 years old, will finally share in the trust with a reported value of $100 million to $110 million. The youngest of the 12 heirs is 19 year old, great-granddaughter Christina Cameron of Lexington, KY who is set to receive $2.6 million to $2.9 million. For more on the case, see the ABA Journal article here or an article about the life of the lumber baron who caused this legal saga here.

The rule, which goes back to the Duke of Norfolk's Case, 22 Eng. Rep. 931 (1682), guards against excessive dead-hand control of property (usually land) transfers. Its most familiar formulation is found in The Rule Against Perpetuities by John Chipman Gray (Call # KF613 .G739 1942): No interest in land is valid unless it must vest, if at all, within 21 years of the end of some life in being at the time of the transfer. In the case of the late Wellington Burt, the bulk of his estate will now be distributed 21 years after the death of his last surviving grandchild, the last survivor among Burt's grandchildren born in his lifetime. She died November 21, 1989.

New York codified the RAP in Section 9-1.1 of the Estates Powers and Trusts Law. Section 9-1.1(a) provides that no interest in real property is valid if the instrument conveying the interest suspends the absolute power of alienation for longer than lives in being plus 21 years. This year, the New York Court of Appeals decision in Bleecker St. Tenants Corp. v Bleeker Jones LLC, 16 N.Y.3d 272 (2011) discussed the rule. New Jersey, in contrast, abolished the common law when the passage of the Trust Modernization Act of 1999 (N.J.S.A. 46:2F-9 et seq.).

A CALI podcast on the RAP is available here for students who want to refresh their understanding of the rule for the bar exam. The Brooklyn Law School Library has on Reserve at the circulation desk Estates in Land & Future Interests: A Step by Step Guide by Linda Holdeman Edwards (Call # KF577 .E39 2009) with chapters titled: Infamous rule against perpetuities -- Applying the rule against perpetuities -- Relief from the rule against perpetuities. Another BLS Library book on the topic is Dead Hands: A Social History of Wills, Trusts, and Inheritance Law by Lawrence Friedman (Call #KF753 .F75 2009) which has a chapter Control by the Dead and Its Limits: the Rise and Fall of the Rule against Perpetuities.

No comments: