What is the Rule Against Perpetuities?

The rule against perpetuities is a feature of English common law that requires that when an ownership interest in property is created, full ownership must be vested within a certain period of time. Before its adoption in the 1600s, English landowners, in their wills, would frequently bequeath the use of their property to their heirs, who would then leave the use of the property to their heirs. This would continue for generations, without bequeathing the actual title, so that the property could never be broken up or sold. This perpetual tying up and control of property long after the death of the owner is sometimes called control by the “dead hand,” or "mortmain.” Like other statutes of mortmain, the rule against perpetuities limits this practice, in part because it tends to concentrate wealth in a small group of families, and in part because it may prevent land from being put to a use that's in the best interest of the family.

The period of time considered in the rule against perpetuities is historically 21 years, and it begins upon the death of the “last identifiable person living when the interest was created.” Thus, a landowner could leave his spouse the use of the marital estate, with full title transferring to their children upon her death, or when they reach age 21, without violating the rule. The rule gets very complicated, however, when considering all the possible contingencies that might occur. In this same example, granting full title to the 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 uniformly observed in all 50 states. Four states have repealed it altogether, while some other states observe a “wait and see” approach – that is, when the period of time specified in the statute has been reached, if full title has been vested in a new owner, then the matter is considered settled; otherwise, the grant of interest is voided and 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 intent of the grantor 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The reason the rule was repealed in Alaska, Idaho, New Jersey and South Dakota was because tax advantages favorable to perpetuities were created in the 1986 Tax Act. The Uniform Statutory Rule Against Perpetuities has been adopted by 28 other states. This rule validates those non-vested interests that actually vest within 90 years of their creation, even if they wouldn't vest within the 21 years specified in the original rule.