Short notes on Rule against perpetuity

Section 114 deals with the ‘Rule against Perpetuity’. The word “perpetuity” means for (almost) ever. As a term used in the Act, it means an inalienable and indestructible interest in the property OR interest, which cannot vest till a remote period of time.

Thus, Section 114 lies down that life interests after life interests cannot be created. For example, a Testator gives a Royal House to A, as long as he is alive. After his death, it is given to B as long as he is alive. After B, it is given to his children for their use. Thereafter, to children’s children and from generation to generation it means no one will take the property. Such a bequest is void. Section 114 carves out the exception to delaying the vesting of full ownership in the property. It states that if absolute vesting of property is not delayed beyond the life time of one or more persons living at the Testator’s death and the minority of some persons who shall be in existence at the expiration of that period, then delaying of such vesting is not invalid. For example, property is given to A for his life.

Thereafter to B for his life. Thereafter to C absolutely. B is born in the lifetime of Testator and the Legatee A. C is born in the lifetime of B but after the death of the Testator. The bequest is valid because the full ownership is vested in C who is born during the lifetime of the last legatee who was born alive at the time of death of the Testator. The period of limitation is that the full ownership of property must vest in the legatee who is born alive at the time of last legatee who is born alive at time of death of the Testator. Section 114 can be summarized thus:

(i) You cannot perpetually create life interests OR there cannot be life interest after life interest perpetually.

(ii) After the last life interest property must rest in someone and it (resting) cannot be perpetually delayed.

(iii) Ultimate legatee must come in existence (either by birth, conception or adoption) when the life interest comes to an end.

(iv) On attaining “full age”, the ultimate legatee must become the full owner vesting of property in him and it should be no more delayed, otherwise it will become void.

(v) The Bequest will not be valid, if vesting of property is delayed beyond the use time of one or more persons living at the time of Testator’s death and the minority of same person.

(vi) Perpetuity is a device tending to take the property out of commerce, for a longer period than a life (lives) (18 years and beyond).

(vii) Its distribution is made between charitable and non charitable objects (property). Although, it is true that charitable or religious trusts are made in perpetuity but they are not within the scope of Section 114 provided that vesting is not beyond the statutory period.

(viii) Section 114 corresponds to section 14 of the Transfer of Property Act, 1882 and it differs from the English law on the subject.

(ix) It is the settlement of an interest descendible from heir to heir so that it shall not be in the power of him in whom it is vested to dispose if off.

(x) A fund is bequeathed to A for life, and after his death, to B for life, and after B’s death to such of B’s sons who shall attain the age of 25 years. If vesting of the fund is delayed beyond the (i) life time of A and 8 and (ii) minority of sons of B, the bequest after B’s death is void.

(i) Justification of the Rule

If the property is taken away from the free and active circulation for the purposes of commerce and improvement, it will fall to decay and the property becomes inalienable (nontransferable). Therefore, to save the property from decay, non use, being looked up, this rule is enacted in the larger interest and on public policy.

(ii) English Law – Indian Law – Distinction

Under the English law, the vesting of property might be postponed for any number of times and an additional term of 21 years. Section 114 permits the vesting to be delayed beyond the life time of person or persons living at the time of testator’s death and minority of some persons who shall be in existence at the expiration of the period and to whom, if he attains the age of 18, the property bequeathed is to belong.

(iii) Bequests to persons hit by Sections 113 and 114

First of all, it is necessary to appreciate the subtle difference in (1) Bequest to ‘Person’ (2) Bequest to “Class” and (3) ‘Persons not falling in the Class if bequest is given to ‘A’, it is bequest to ‘Person’. But if bequest is given to Children of A, it is bequest to ‘Class’ of persons who are the children of A. If A has children, some of them, living at the time of death of Testator and some of them, not living but born after the death of the Testator. No doubt, whether born before or after the death of Testator, all of them will be included in the ‘Class’ of children of A. But this ‘Class’ will include (1) children born after the death of Testator and (2) children born before the death of the Testator.

It means although the ‘Class’ is one, in given case, some persons may be included and some may not be included. For example, Bequest is given to ‘Children’ of A living at the time of death of the Testator. ‘Children’ of A born after the death of Testator will be excluded despite the fact that they fall in the ‘Class’ of children of A. After hang noted the subtle difference in Bequest to ‘Person’, Bequest to ‘Class’ and ‘Persons not falling in the ‘Class’, it is necessary to note that Sections 113 and 114, refers to bequests to ‘persons (1) falling or (2) not falling in a given ‘Class’. Section 115 seeks to clarify that ‘Persons’ (1) falling in the given ‘Class’ but (2) not hit by Sections 113 and 114, will receive the bequest. The other persons (1) in the ‘Class’ but (2) hit by Section 113 and 114 will not get the bequest. It can also be said that by operation of Sections 113 and 114 neither the Will nor the Bequest is rendered void. The Bequest/s and the Will, both are operative. What is inoperative is a part of Bequest, which relates to persons who are hit by Sections 113 and 114.

Illustrations:

1. Life interest is given to A. Thereafter, A’s children \shall attain the age of 25 years.

Bequest to A’s children (a) born after Testator’s death and (£>) not attaining the age of 25 years within 18 years after death of Testator (vide Section 117) will be inoperative. But it will be operative with regard to others.

2. Life interest is given to A. Thereafter, B, C, D and all other children of A, who shall attain the age of 25 years at the time of death (of Testator), will take the bequest.

Children B, C and D (& all other) will take the bequest but they must attain the age of 25 years within 18 years (vide Section 117) after Testator’s death.

(iv) Subsequent Bequest fails if earlier fails.

Section 116 also revolves on the provisions of Sections 113 and 114. It lies down that if prior bequests are void by reasons of provisions contained in Sections 113 and 114, the subsequent bequest is also rendered void. For example, life interest is given to A. Thereafter, life interest is given to A’s Sons, first attaining the age of 25 years. Thereafter, the Bequest is B. Bequest to such of sons of A, who shall first attain the age of 25 years, is void under Section 114. As such, the subsequent Bequest to B is also void (under Section 116).

(v) Period of Limitation for the accumulation of bequeathed property and its income.

Section 117 prohibits accumulation of income of bequeathed property for a period longer than 18 years from the death of the Testator and renders the direction void to the extent it is for a period longer than 18 years. Section 117 also makes it clear that at the end of 18 years, the bequeathed property together with its income is to be disposed off as if there was no such direction. There are, however, three exceptions to this general rule of period of limitation. In the following cases, accumulation for a period longer than 18 years is permissible and will not render the direction of accumulation void.

1. The accumulation for the payment of the debts of the Testator or any other person taking interest under the ‘Will’.

2. The accumulation for the provision of portions for children or remoter issue of Testator as well as any other person taking interest under the ‘Will’.

3. The accumulation for the preservation or maintenance of any bequeathed property.

(vi) Bequest to religion or charitable uses.

Section 118 does not apply to Muslims (because they have their own personal law on succession), Hindus, Sikh, Jains, and Buddhists (as per Schedule III of the Act) and also to the Parsis (as per the amendment of 1991). It permits bequests to religious or charitable uses only and only if the Testator does not have (1) Nephew (2) Niece and (3) near relatives. Not only that but also:

1. The ‘Will’ must have been executed not less than 12 months before the death of the Testator AND

2. The ‘Will’ must have been deposited for safe custody in some place provided by Law.

3. The Will must have been so placed in safe custody provided by Law within 6 months from the date of execution of the ‘Will’.

Date of vesting of legacies

When Testator bequeaths a TV set to a Legatee, the Legatee gets the TV set after death of the Testator. However, if Testator bequeaths a flat at Warden Road for a life of ‘A’ and thereafter to B, no doubt B will get the flat but only after the demise of ‘A’. Thus, after the death of Testator, the flat vests in B but the possession of Flat is delayed until the death of prior legacy to A. As such, no doubt the flat vests in B, but it are only the right or the ‘interest’ in contradistinction to the possession of Flat.

1. Legacy to D, after A, B, C died under 18 years of age. D has contingent interest until A, B, C all die under 18.

2. Sum of money given to A if he attains the age of 18 or when he shall attain the age of majority. A’s interest is contingent.

3. Bequest to A for life then to B, if then B is living. But if B is not living then to C. B and C have contingent interest.

4. Legacy to A when she attains the age of 18 or marries under that age with consent of D. But if she neither attains the age of 18 nor marries under that age then to C. A and C have contingent interest but if A attains the age of 18, she takes the legacy although she might have married before that the age without the consent of D.

5. Estate to A until he marries. If marries then to B. B’s interest is contingent.

Onerous gifts

Section 122 imposes liability/obligation. Such liability/obligation must be accepted fully. For example, A give Shares to B. Some shares are of good companies and some are of bad companies. He cannot ELECT/SELECT. He takes the whole or takes nothing.

Section 123 lies down that if there are two wills, or two separate legacies, he can refuse the onerous one. As a matter of fact, Section 123 applies to plurality of Gifts.

How to determine plurality of Gifts?

1. Two gifts should be independent of each other.

2. If from the intention of the Testator, it is seen that the Testator did not want to give any option to the legatee, then it is one gift.

3. One single – undivided gift is evidence of Testator’s intention.

4. Two gifts need not be in two sentences or in two separate paragraphs. It will be a question of construing the Will and the Will will be construed by applying the rule of “Arm chair Rule”.

Section 124 relates to Contingent Gifts which take place on happening of some specified uncertain event. For example:

(a) A Bequest is given to A upon contingent that (i) if A dies then to B or (ii) if A comes back from England. But no time is specified. Then unless the event takes place, legacy does not take effect.

(b) Legacy to A and in case of death of A, before the death of Testator, to B. If A survives the Testator, B does not take the legacy.

(c) Legacy to A and in case he dies without the child/children, then to B. B will not get legacy (i) if A survives Testator and (ii) if A does not survive Testator but leaves child/children.

(d) Legacy is given to A if he attains 18 years and if he does not then to B. If A dies after 18 years, B will not get legacy.

(e) Legacy is given to A for life then to B and in case of B’s death without child/ children. Hereby, B’s death means death of B during life time of A.

Section 125 lays down that the Legacy will be given only to those who will survive the Testator, if the specified event is uncertain. For example,

1. Legacy to A and B in equal share. A dies before Testator and B survives the Testator, the legacy goes to B.

2. For life to A then to B and C equally. C only survives, and then it will go to B.

3. A for life. Then to B and C or if any one of the two dies before A survive will take the whole. B dies first and C dies later on. Legacy goes to C’s representative.