Economics
The Rule Against Perpetuities
Quick fact
Under the traditional rule, a future interest is void if there is any possibility—no matter how unlikely—that it will vest more than 21 years after all lives in being at the creation of the interest have died. This means a gift to 'my great-grandchildren who reach 30' can be invalid even if all great-grandchildren actually do reach 30 within the allowed period.
Why this is interesting
You’ve just written a will that gives your great-grandchild your family farm, but a court could strike it down as illegal—even though you’re just trying to be generous. Why would the law refuse to honor your wish?
Read the full explanation
Understanding The Rule Against Perpetuities
Imagine you own a plot of land and you want to give it to your child for life, then to your child’s first child who turns 25. The rule against perpetuities is concerned with when that final gift 'vests'—meaning the recipient’s right becomes fixed and definite. The law says: at the moment you create that gift, we look at all people who are alive at that time (your child, maybe your grandchildren if they exist). After those people die, we add 21 years. If there is any chance that the gift might not vest within that window, it is void. This prevents you from tying up property for centuries, because future generations should be able to buy and sell land freely.
A deeper explanation
The rule's purpose is to ensure that property can be freely transferred after a reasonable period. It works by invalidating contingent future interests that might 'vest' too remotely—more than 21 years after the death of a 'life in being' (a person alive at the creation of the interest). The rule applies to interests that are not vested at the time they are created. A classic example: a devise 'to A for life, then to A’s first child who reaches 25.' If A has no child at the time of the gift, the interest is contingent on a child being born and reaching 25. That could happen more than 21 years after A’s death, so the gift is void. The rule is not concerned with what actually happens; it looks at what could possibly happen at the moment the interest is created. This 'possibility test' is strict and can invalidate gifts that in practice would vest within the period. To mitigate, many states have adopted the 'wait and see' approach or the Uniform Statutory Rule Against Perpetuities, which uses a 90-year fixed period.