American Security Trust Co. v Cramer
175 F.Supp. 367 (1959)

  • Abraham wrote a will. It was complicated:
    • First, a life income trust to his wife.
    • When she died, half of the principle was given to Abraham’s siblings.
    • The other half was sued to create a life income trust for Abraham’s daughter, Hanna.
    • When Hanna died, her principle was to be split up and used to create individual life income trusts for each of Hanna’s kids.
      • Hanna had four kids, Mary and Hugh, who were born before Abraham’s death, and Depue and Horace who were born after Abraham’s death.
    • When each of Hanna’s four kids died, their principle went to their heirs.
      • Therefore, the interests didn’t vest until the death of Hanna’s children.
  • After Abraham died, Abraham’s other heirs sued to get the will provisions thrown out.
    • They argued that the will violated the Rule Against Perpetuities.
  • The Trial Court found that the life income trusts to Hanna’s children did not violate the Rule Against Perpetuities, and they decided not to worry about the remainder interest for now.
  • Eventually Hugh died and his share was passed to his heirs. Abraham’s heir sued again, claiming that Abraham’s will violated the Rule Against Perpetuities.
    • If the gifts of the remainders failed, the money from the life income trusts would go back to Abraham’s estate, and Abraham’s heirs would get it.
  • The Trial Court found that the specific gift to Hugh’s heirs did not violate the Rule Against Perpetuities.
    • The Rule Against Perpetuities says that no interest is valid unless it vests within 21 years after some life in being at the creation of the interest.
      • In this case, Hugh was alive when Abraham died, so the gift to his children did not specifically violate the rule.
  • Horace and Depue died. Abraham’s heirs sued yet again.
    • This time, they argued that Horace and Depue were not lives in being when Abraham died. Therefore the gifts to their heirs should be invalid.
  • The Trial Court found that the gifts to the children that were born before Abraham died (Mary and Hugh) were valid, but the gifts to those not alive when Abraham died (Horace and Depue) were not.
    • The Trial Court found that this was a class gift.
      • In a class gift, the members of a class must be finally determined within a life in being plus 21 years, or the gift will violate the Rule Against Perpetuities.
    • Hanna might have had (and actually did) a child who was born after Abraham died. This child might have lived for more than 21 years after all the people mentioned in Abraham’s will (aka the lives in being) died. If that had happened, a gift that vested when that child died would have occurred more than 21 years after the death of the last life in being, and would have been invalid.
      • The Rule Against Perpetuities is not concerned with what actually happened, only with what could have happened.
        • At the time of Horace and Depue’s deaths, Mary was still alive, so no gift actually vested more than 21 years after a life in being.
    • Instead of throwing out the entire gift, the Trial Court looked to the specific wording of the will, which created independent life income trusts to each of Hanna’s kids. They decided that only the specific trusts that violated the Rule Against Perpetuities (aka the gifts to children born after Abraham’s death) were invalid.
      • The Court basically found that the class gift was made up of a number of subclasses, and holding a gift to one subclass invalid didn’t effect the validity of the other subclasses.