You are on page 1of 11

Contingent interest

A contingent interest is an interest which is uncertain, either as to the

person who will enjoy it in possession or as to the event on which it will
arise. 57 Am J1st Wills § 1217.
A future interest is contingent where the person to whom or the event
upon which it is limited to take effect in possession or become a vested
estate is uncertain. Caine v Payne, 86 App DC 404, 182 F2d 246, 20
ALR2d 823. If the condition upon which a future interest depends is
precedent, the interest is contingent; if the condition is subsequent, the
interest is vested, subject to defeasance. Anno: 131 ALR 712.
Walton v. Commissioner
Walton v. Commissioner, 115 T.C. 589 (2000), a decision of the United
States Tax Court in favor of taxpayer Audrey J. Walton, "ruled that a
grantor's right to receive a fixed amount for a term of years, if that right
is a qualified interest within the meaning of Section 2702(b), is valued
for gift tax purposes under Section 7520, without regard to the life
expectancy of the transferor. More simply, a grantor's estate's contingent
interest in a grantor-created annuity upon the grantor's death does not
constitute a gift to anyone; but rather, is a retained interest of the grantor
Shared appreciation mortgage
A shared appreciation mortgage or SAM is a mortgage in which the
lender agrees as part of the loan to accept some or all payment in the
form of a share of the increase in value (the appreciation) of the

In the UK
A shared appreciation mortgage is a mortgage arranged as a form of
equity release. The lender loans the borrower a capital sum in return for
a share of the future increase in the growth of the property. The
borrowers retain the right to live in the property until death.
Shared Appreciation Mortgages sold between 1996-1998 have not
always turned out to be products beneficial to the borrowers who took
them out. In the late 90s, Barclays Bank and the Bank of Scotland sold
about 11,000 shared appreciation mortgages, targeting pensioners, just
before the sharp rises in the property market. Customers could borrow
the equivalent of 25% of the value of their property interest free. The
banks gain from receiving 75% of the increase in value of the customer's
property once it is sold.
The last ten years have seen property prices increase by 3 to 4 times.
Many customers who took out a shared appreciation mortgages now find
themselves trapped.
An example : a property valued at £100,000 in 1997 is now worth
£400,000 (2007). The client took out a SAM of £25,000 (or 25% of the
1997 value). The contract stated that, upon sale or death, the banks could
claim 75% (3 x 25%) of the difference in value plus the original loan
(75% x £300,000 + £25,000 = £250,000). Therefore the bank will
receive, upon sale, £250,000 (62.5% of the current value) and the client
£150,000. The problem arises when the customer wants to sell up and
move home. With only £150,000 to play with, even downgrading to a
smaller property half the size of their current house would cost £200,000
and as such would be unaffordable.
Thus, in a market where house prices are rising in the long-term, this
type of deal is usually detrimental to the customer. On the other hand, if
a customer took out a SAM and house prices stayed steady or declined,
the customer would effectively have a completely interest free loan with
no downsides. On a 10 year mortgage of £100,000 at 6%, the customer
would save £33,225 in mortgage repayments with no loss to the
Many disgruntled SAM customers have got together to form the Shared
Appreciation Mortgage Action Group (SAMAG). They hope to find a
legal settlement for "victims" of shared appreciation mortgages and are
pursuing legal remidies.
Contingent cooperator
In game theory, a contingent cooperator is a person or agent who is
willing to act in the collective interest, rather than his short-term selfish
interest, if he observes a majority of the other agents in the collective
doing the same. The apparent contradiction in this stance is resolved by
game theory, which shows that in the right circumstances, cooperation
with a sufficient number of other participants will have a better outcome
for cooperators than pursuing short-term selfish interests
Beneficiary (trust)
In trust law, a beneficiary or cestui que use, a.k.a. cestui que trust, is
the person or persons who are entitled to the benefit of any trust
arrangement. A beneficiary will normally be a natural person, but it is
perfectly possible to have a company as the beneficiary of a trust, and
this often happens in sophisticated commercial transaction structures
With the exception of charitable trusts, and some specific anomalous
non-charitable purpose trusts, all trusts are required to have ascertainable
Generally speaking, there are no strictures as to who may be a
beneficiary of a trust; a beneficiary can be a minor, or under a mental
disability (in fact many trusts are created specifically for persons with
those legal disadvantages). It is also possible to have trusts for unborn
children, although the trusts must vest within the applicable perpetuity

There are various ways in which beneficiaries of trusts can be
categorized, depending upon the nature and need of the categorization.
From the perspective of the trustees' duties, it is most common to
differentiate between:
• fixed beneficiaries, who have a simple fixed entitlement to income
and capital; and
• discretionary beneficiaries, whom the trustees must make decisions
as to the respective entitlements.
Where a trust gives rise to sequential interests, from a tax perspective
(and also from the point of view of trustee's duties), it is often necessary
to differentiate beneficiaries sequentially, between:
• those with a vested interest, such as tenants for life; and
• those with a contingent interest, such as remainder men

For the purposes of various exercise of beneficiaries' rights, it is often

necessary to distinguish between:
• beneficiaries under a bare trust (including a constructive or
resulting trust), to whom the trustee owes basic duties arising by
law; and
• beneficiaries under an express trust (either an inter vivos trust or a
testamentary trust), where the trustee owes additional duties and
has additional powers specified by the trust instrument

Rights and interest

The nature of a beneficiaries' interest in the trust fund varies according
to the type of trust.
In the case of a fixed trust, the beneficiaries' interest is proprietary; they
are the owners of an equitable interest in the property held under the
The position is slightly different in the case of a discretionary trust; in
such cases the beneficiaries are dependent upon the exercise by the
trustees of their powers under the trust instrument in their favor.
Similarly, where a trust gives rise to successive interest, the title of a
remainder man is a prospective, or contingent, interest; although unlike a
discretionary beneficiary, this is still a species of property that can be
dealt with, much in the same was as a contingent or prospective debt.

Main article: Taxation of trusts
Tax planning usually plays a considerable role in relating to the use of
Historically, whilst the courts have been fairly amenable to the use of
trusts in tax planning, as tax planning schemes have become more
aggressive, so the courts have increasingly taken a restrictive view of the
tax treatment of trusts.
Although individual countries tend to have very detailed rules about the
taxation of trusts, the three mechanisms whereby taxation is usually
assessed is by either treating (i) the trust as a separately taxable entity in
its own right, (ii) treating the trust property as still the property of the
settler, and (iii) treating the trust property as belonging absolutely to the
beneficiaries. Some jurisdictions apply different combinations of the
rules in income tax, capital gains tax and inheritance tax.

Beneficiaries' powers
Because an interest under a trust is a species of property, adult
beneficiaries of sound mind are able to deal with their rights under the
trust fund as they could with any other species of property. They can sell
it, assign it, exchange it, release it, mortgage it, and do most other things
that they could do with a chose in action.
If all of the beneficiaries of the trust are adults and of sound mind, then
they can terminate the trust under the rule in Saunders v Vautier, and
require the trustees to transfer absolute legal title to the trust assets to the

Eisner v. Macomber

Eisner v. Macomber, 252 U.S. 189 (1920), was a tax case before the
United States Supreme Court. It is notable for the following holdings:
• a pro rata stock dividend, where a shareholder received no actual
cash or other property, and retained the same proportionate share
of ownership of the corporation as was held prior to the dividend,
was not taxable income to the shareholder within the meaning of
the Sixteenth Amendment
• An income tax imposed by the Revenue Act of 1916 on such
dividend was unconstitutional, even where the dividend indirectly
represented accrued earnings of the corporation.
Contingent commissions
There is a big difference, however, between insurance agents and
brokers. Agents have a fiduciary duty to the insurance company, brokers
have a duty to the insurance purchaser. This difference leads to unclear
criticisms of contingent commissions as encouraging conflicts of
interest. The conflict is relevant for brokers, not for agents.
Criticism of broker contingent commissions is based on the fact that they
are structured so that insurance companies compete (among brokers) on
the fee paid to the broker rather than the price to the buyer. This creates
a conflict of interest for the broker influencing him to recommend his
customer to place his business with an insurer who offers a higher level
of contingent commission to the broker. Another criticism is that the full
brokerage commission is not necessarily disclosed to the buyer, who
therefore has less knowledge of the broker's incentives.
The practice of Overrides has been defended on the basis that payments
are made based upon the whole book of business that a broker places
with an insurer and not for individual cases; and that the practice is
intended to compensate brokers for activities carried out on behalf of the
insurer, rather on behalf of their customers (for which they receive
brokerage or fees).
In 2004 New York Attorney General Eliot Spitzer led an attack on the
contingent commission practices in the U.S.A. insurance industry,
though the fallout from his investigations Contingent commissions is a
term used in the American insurance industry for any kind of
commission which is contingent upon some event occurring (instead of a
commission paid on the sale itself). In the UK this form of payment is
known as Overrides.
Theoretically, this term could apply to any type of industry. An example
from the mortgage brokerage industry would be if the brokers'
commission depends on the borrower continuing to repay the loan,
rather than being paid in a lump-sum when the loan is issued.

In practice, contingent commissions paid by insurance companies to

brokers have typically been contingent on the broker steering a certain
amount of business towards the insurance company, and have not been
contingent on a particular buyer's behavior. Contingent commissions
also are used between insurers and their regular sales force, their agents.
These agent commissions are sometimes contingent on the loss
performance of customers, recognizing the agent's ability to act as a
"front line" underwriter.
Have led to worldwide changes. The attack was not so much on the
practice in and of itself, but on the allegations that the insurance
companies had an oligopoly agreement between each other (not at will
but caused by the immense influence of the largest brokers) to submit
false prices to stifle real competition.
In 2005 the insurance broker Arthur J. Gallagher & Co. agreed to a $27
million settlement with the Illinois Attorney General with regard to
accepting contingent commissions and decided to end the practice of
collecting contingent commissions within the company. Other
settlements following similar investigation include Marsh, Aon, and
Future interest
This article is about the legal concept of future interests in property. For
the actuarial valuation of future streams of income, see Future interests
(actuarial science).
In property law and real estate, a future interest is a legal right to
property ownership that does not include the right to present possession
or enjoyment of the property. Future interests are created on the
formation of a defeasible estate; that is, an estate with a condition or
event triggering transfer of possessory ownership. A common example
is the landlord-tenant relationship. The landlord may own a house, but
has no general right to enter it while it is being rented. The conditions
triggering the transfer of possession, first to the tenant then back to the
landlord, are usually detailed in a lease.
As a slightly more complicated example, suppose O is the owner of
Black acre. Consider what happens when O transfers the property "to A
for life, then to B." Person A acquires possession of Black acre. Person
B does not receive any right to possess Black acre immediately;
however, once person a dies, possession will fall to person B (or his
estate, if he died before person A). Person B has a future interest in the
property. In this example, the event triggering the transfer is person A's
Because they convey ownership rights, future interests can usually be
sold, gifted, willed, or otherwise disposed of by the beneficiary (but see
vesting below). Because the rights vest in the future, any such
disposition will occur before the beneficiary actually takes possession of
the property.

Rule against perpetuities

The rule against perpetuities at common law invalidates certain future
interests (traditionally contingent remainders and executor interests) that
may vest beyond the time of perpetuities. In essence, the rule “limits[s]
the testator's power to earmark gifts for remote descendants".
The perpetuities period under the common law rule is not a fixed term of
years. By its terms, the rule limits the period to at the latest 21 years
after the death of the last identifiable individual living at the time the
interest was created. This "measuring" or "validating" life need not have
been a purchaser or taker in the conveyance or devise. The measuring
life could be the grantor, a life tenant, a tenant for a term of years, or in
the case of a contingent remainder or executor devise to a class of
unascertained individuals, the person capable of producing members of
that class.
The rule prevents the property owner from distributing and controlling
his assets for too long a period of time after his death — a concept often
referred to as control by the "dead hand" or "mortmain". When a part of
a grant or will violates the rule, only that portion of the grant or devise is
removed. All other parts that do not violate the rule are still valid.
Although most discussions and analysis relating to rule revolve around
wills and trusts, the rule applies to any future dispositions of property,
including options.
The rule against perpetuities at common law has been amended by
statutes. In England, the Statute of Uses (1536) and the Statute of Wills
(1541) and the consequent rise of flexible future interests made the rule
a significant judicial tool in defeating the intent of landowners in grants
and devises. Major alterations to the common law rule in the United
Kingdom came into effect under the Perpetuities and Accumulations Act
of 1964, including the application of traditional 21-year limitation on
The rule is also studied in Australian law.

In the United States it has been abolished by statute in Alaska, Idaho,

New Jersey, and South Dakota. Twenty-eight other U.S. states have
adopted the Uniform Statutory Rule against Perpetuities, which validates
non-vested interests that would otherwise be void under the common
law rule if that interest actually vests within 90 years of its creation.
Other jurisdictions apply the "wait and see" or "cy-press" doctrines that
validate contingent remainders and executor interests void under the
traditional rule in certain circumstances. These doctrines have also been
codified in the United Kingdom by the 1964 statute.

Conceptual history

Conceptual history (also the History of Concepts) is a term used to

describe a branch of the humanities, in particular of historical and
cultural studies, which deals with the historical semantics of terms. It
sees the etymology and the change in meaning of terms as a forming a
crucial basis for contemporary cultural, conceptual and linguistic
understanding. Conceptual history deals with the evolution of
paradigmatic ideas and value systems over time, such as "liberty" or
"reform." It argues that social history – indeed all historical reflection –
must begin with an understanding of historically contingent cultural
values and practices in their particular contexts over time, not merely as
unchanging ideologies or processes (i.e. as in Marxism).

Interest in conceptual history was given a particular boost in the 20th

century through the publication of the Historisches Wörterbuch der
Philosophie, the Geschichtliche Grundbegriffe and the journal Archiv
für Begriffsgeschichte.
Conceptual history is an interdisciplinary methodology. Alongside the
philosopher Joachim Ritter, the historians Otto Brunner and Reinhart
Koselleck and the sociologist Erich Rothacker are viewed as the leading
scholars of the research area in the German-speaking world and