The rule against perpetuities appears deceptively simple: an interest in real or personal property is invalid unless it is certain to vest or terminate no later than twenty-one years after the death of an individual then alive. If the rule is violated the transfer is void ab initio. However, the rule in application has bedeviled lawyers and law students alike for hundreds of years. Interpretation of the rule usually depends not upon whether the facts as known violate the rule but whether any imaginable fact under the instrument would violate the rule. In testing this theoretical proof, the law considers examples such as the “fertile octogenarian” or the “unborn widow.” It is common practice to put “savings clauses” in instruments to prevent running afoul of the rule, Essentially, such clauses state that if the interest created is deemed to violate the rule against perpetuities the interest shall terminate one day before twenty-one years after the last life in being has passed. There have been recent movements to simplify the rule against perpetuities and/or restrict it. Section 2-901 of the Uniform Probate Code sets forth the simplification approach. Under the provisions of the Uniform Probate Code, a non-vested property interest is invalid unless: (i) it is certain to vest or terminate no less than twenty-one years after a life in being; or (ii) “the interest either vests or terminates within 90 years after its creation.” This 90 year window permits drafters to create a bright line for termination. The more dramatic part of the Uniform Probate Code treatment however, is the “wait-and-see” rule. §§ 2-901(b) & (c). Under this approach, an interest or a power of appointment that is not valid under the general rule (and thus would have been invalid under the common law rule) is given a second chance. “Such an interest is valid if it does not actually remain in existence and non\vested when the 90-year permissible vesting period expires; such a power of appointment is valid if it ceases to be subject to a condition precedent or is no longer exercisable when the permissible 90-year period expires.” Uniform Probate Code § 2-901 cmt. In 1998, Maryland adopted an important exception to the rule against perpetuities. The rule against perpetuities does not apply to “[a] trust in which the governing instrument states that the rule against perpetuities does not apply to the trust and under which the trustee, or other person to whom the power is properly granted, has the power under the governing instrument, applicable statute, or common law to sell, lease, or mortgage property for any period of time beyond the period that is required for an interest created under the governing instrument to vest, so as to be good under the rule against perpetuities.” Md. Code Ann., Est. & Trusts § 11-102(e). In other words, if the trustee were given the power to sell or otherwise dispose of property which is the subject of a trust which would have been terminated under the law against perpetuities, such a trust will now be upheld. This is an important development in Maryland law. Now, a drafter may refer to § 11-102(e) as a method of “bullet-proofing” the trust from the rule against perpetuities. Take note, however, that although the exception in § 11-102 covers trusts it may not apply to all other arrangements. See, e.g., Ferrero Construction Co. v. Dennis Rourke Corp., 311 Md. 560, 536 A.2d 1137 (1988) (holding that the rule against perpetuities applies to rights of first refusal). The approach of the Maryland Code seems to target a main underlying policy consideration of the rule against perpetuities. The rule developed in England against the backdrop of changing economic times where land which was tied multi-generationally was the source of wealth to which the entrepreneurial class did not have access. The rule against perpetuities effectively forced land back into commerce. Section 11-102(e) accomplishes the same purpose by permitting the trustee to sell the property after the rule against perpetuities would have terminated the trust.[1]
[1] Similarly, old Maryland case law states that the total alienation of property rights is prohibited.