Understand future interests in property law, including how they are created, the key types (reversions, remainders, executory interests), and their role in estate planning and real estate.
In the complex world of property and estate law, not all rights to ownership are immediate. A “future interest” represents a legal right to a property that you will or may possess at some point in the future. Unlike a present right, this interest does not grant current possession or enjoyment of the property. Instead, it is a non-possessory interest that can become possessory in the future, often upon the occurrence of a specific event or condition.
Future interests are a foundational concept in property law, created when an owner, known as the “grantor,” conveys less than their full ownership to another person. They are a critical component of estate planning, ensuring that a property can be transferred to designated heirs or other beneficiaries under specific terms, even after the grantor is no longer alive.
Key Types of Future Interests
Future interests are primarily divided into two categories: those retained by the grantor and those created in a third party, or “transferee”.
| Type | Description |
|---|---|
| Reversion | This occurs when a grantor gives away an estate that is less than what they originally held, and the property automatically reverts back to them when the prior estate ends naturally. For example, “To A for life.” The grantor retains a reversionary interest. |
| Possibility of Reverter | This interest follows a fee simple determinable and automatically reverts to the grantor if a specified condition is violated. |
| Right of Entry | Also known as a “power of termination,” this follows a fee simple subject to a condition subsequent. If the condition is breached, the grantor has the voluntary right to reclaim the estate, but it does not happen automatically. |
| Type | Description |
|---|---|
| Remainder | This interest follows the natural termination of a prior estate, such as a life estate. A remainder can be either vested (given to an ascertained person and not subject to a condition precedent) or contingent (given to an unascertained person or subject to a condition precedent). |
| Executory Interest | This interest becomes possessory by “cutting short” or divesting the previous estate. For example, a property may be granted “to A, but if A ever drinks alcohol, then to B”. |
💡 Key Tip
A future interest, even though it doesn’t grant present possession, can be a valuable proprietary interest that can be sold, gifted, or willed to heirs before it becomes possessory.
⚠️ Caution
The holder of a future interest who is not in control of the property may face the “problem of waste,” where the current possessor could devalue the property. However, future interest holders have the right to prevent this by restricting harmful actions and ensuring the current possessor maintains the property.
Illustrative Case Example
Consider a hypothetical conveyance: “To Mary for life, then to Bob if he survives Mary; otherwise, to Cindy.”
- Mary has a life estate, which is the present possessory interest.
- Bob has a contingent remainder because his interest is subject to the condition precedent that he must survive Mary to take possession.
- Cindy also has a contingent remainder, as her interest is dependent on Bob not surviving Mary.
This simple example highlights the importance of precise language in legal documents to avoid ambiguity and ensure the grantor’s intent is carried out. This is where the guidance of a qualified legal expert becomes invaluable.
Summary of Future Interests
- Future interests are a core concept in property law, allowing for the transfer of property rights at a future date.
- They can be held by either the original grantor (reversion, possibility of reverter, right of entry) or a third-party transferee (remainder, executory interest).
- Future interests can be either “vested” (certain to become possessory) or “contingent” (dependent on a condition).
- Despite not granting current possession, a future interest is a valuable and transferable legal asset.
- Properly drafting legal instruments is crucial to ensure future interests are created correctly and fulfill the grantor’s wishes.
Future Interests at a Glance
Future interests are rights to property possession that take effect in the future, contrasting with present possessory estates. They are a fundamental tool in estate planning and property law, allowing grantors to set conditions on how their property will be transferred after their lifetime. By understanding the different types—reversions, remainders, and executory interests—you can better comprehend how ownership can be structured across different timelines and beneficiaries. A well-drafted legal document is essential to ensuring these interests are valid and enforceable, protecting both the grantor’s intent and the future rights of beneficiaries.
Frequently Asked Questions (FAQs)
Yes, a future interest is a valuable legal asset and can typically be sold or transferred before it becomes possessory.
A vested remainder is given to an ascertained person and is not subject to a condition precedent, meaning it is certain to become possessory. A contingent remainder is either given to an unascertained person or is subject to a condition that must be met before it can become possessory.
The Rule Against Perpetuities is a complex legal doctrine designed to prevent property from being tied up in future interests indefinitely. It requires that an interest must vest (or fail to vest) within 21 years after the death of some life in being at the time the interest was created. Most jurisdictions have either abolished or modified this rule.
A life estate is a common example of a present possessory estate that is often followed by a future interest. For example, a grantor can give a property to “A for life,” with a future interest (such as a remainder) that will pass to “B” upon A’s death.
The “problem of waste” arises when the current possessor of a property takes actions that devalue it, potentially harming the future interest holder’s rights. The law provides remedies, allowing future interest holders to protect their interest by preventing the current possessor from committing waste.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. The information provided is a general overview of a complex legal topic and may not apply to your specific situation. Legal statutes and case law vary by jurisdiction, and the principles discussed here may have been modified or abolished in certain areas. For legal guidance regarding future interests or any other property matters, you should consult with a qualified legal expert. This content was generated with the assistance of an AI.
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Please consult a qualified legal professional for any specific legal matters.