Legal Definitions - all-or-nothing rule

The all-or-nothing rule is a specific principle in property law that applies to "class gifts," particularly in the context of preventing property from being tied up indefinitely in the future (a concept known as the Rule Against Perpetuities). A class gift is a gift made to a group of people, such as "to my nieces and nephews" or "to the children of my friend."

This rule dictates that if a gift is made to a class of beneficiaries, and there is any possibility that the interest of even one member of that class might vest (become certain and fixed) too far into the future, then the entire gift to the entire class is considered invalid. It doesn't matter if the interests of other class members would clearly vest within the legally permitted timeframe; the potential invalidity for even one member causes the whole gift to fail. The law treats the gift to the class as an indivisible whole; if any part of it is problematic, the whole gift collapses.

Here are some examples to illustrate this rule:

• Example 1: A Grandparent's Trust for Future Generations

  Imagine a will that states: "I leave my entire estate in trust, with the income to be paid to my children for their lives. Upon the death of my last surviving child, the principal of the trust shall be distributed equally among all my grandchildren who reach the age of 30."

  How it illustrates the rule: At the time the will takes effect, the testator might have living children but no grandchildren, or only young grandchildren. A child of the testator could have another child (a grandchild) many years later. This newly born grandchild might not reach the age of 30 until long after the legally permitted period for interests to vest (typically, 21 years after the death of all individuals alive when the will became effective). Because there is a *possibility* that even one future grandchild's interest might vest too remotely, the all-or-nothing rule would invalidate the *entire gift* of the trust principal to *all* grandchildren, even those who might clearly reach age 30 within the legal timeframe. The entire gift to the class of grandchildren would fail.

• Example 2: A Conditional Gift to Future Employees' Children

  Consider a wealthy business owner who creates a fund in their will, stating: "I establish a scholarship fund for all children of my current employees who graduate from an accredited university, provided they do so within 10 years of their 20th birthday. The fund will be distributed once all eligible children have graduated or the 10-year period has expired for each."

  How it illustrates the rule: An employee who is currently very young could have a child many years in the future. That child might not graduate from college until well beyond the legal time limit (21 years after the death of the business owner and all current employees). The "class" of eligible children is not closed, and the condition for *some* members to receive their scholarship could be too remote. Even if many children of current employees would clearly receive their scholarships within the legal timeframe, the *possibility* that a child born much later might not meet the condition until too remotely causes the *entire scholarship fund gift to the entire class* to fail under the all-or-nothing rule.