Future Interests

Remainder

A remainder is a future interest that is capable of becoming possessory at the termination of the prior estate. It is required that the future interest be certain of future possession, only that it be possible for the interest to become possessory when the prior estate ends. If, at the time the future interest is created, it is not possible for it to become possessory upon the termination of the prior estate, the future interest is not a remainder.

Contingent Remainder

A remainder is contingent if it is: Given to an unascertained person; Made contingent upon some event occurring other than the natural termination of the preceding estate; or If there is a conditional element incorporated into the description of, or into the gift to, the remainder man. given to an unascertained person. Contingent remainders are always subject to the Rule Against Perpetuities. Remainder Subject to a Condition Precedent → this occurs when there is a condition that must be met which is built into the conveyance. Alternative Contingent Remainder → a pair of remainders that have opposite conditions precedent. If the first interest is a contingent remainder interest, the following interest will also be a contingent remainder interest because the contingency needs to be resolved.

Reversion

A reversion is the interest remaining in the grantor, or in the successor in interest of a testator, who transfers a vested estate of a lesser quantum than that of the vested estate which he has. The hierarchy of estates includes: Fee simple > fee tail > life estate > leasehold estate Since reversions result from the hierarchy of estates, they are thought of as the remnant of an estate that hasn't entirely passed away from the transferor. All reversions are retained interests, which remain vested in the transferor. When a reversion is retained, it may or may not be certain to become possessory in the future.

Vested Remainder

A vested remainder is a remainder which is already vested in a person. A remainder is vested if: It is given to an ascertained person; and It is not subject to a condition precedent. A remainder may be... Indefeasibly vested → The remainder is certain of becoming possessory in the future and cannot be divested. Vested, but not certain of becoming possessory. Vested, subject to being divested if an event happens. Vested remainders generally are not subject to the Rule Against Perpetuities, except in the case of a vested remainder subject to open. Vested Remainder Subject to Open → this occurs when later-born children are entitled to share in the gift. Vested Remainder Subject to Divestment → this occurs when a shifting interest is created in a transferee that can divest a vested remainder before it becomes possessory. If, after words giving a vested interest, a clause is added divesting it, the remainder is vested.

Executory Interest

An executory interest is a future interest in a transferee that can take effect only by divesting another interest. Executory interest can only divest vested interests (i.e. vested remainders) because they have to be certain to vest so that they can be divested against. This is a fee simple that, upon the happening of a stated event, is automatically divested by an executory interest in a transferee. This can be created either in possession or in remainder. An executory interest can only be created in a transferee. If a transferor wants to create a future interest in a transferee after a defeasible fee, it will necessarily be an executory interest. Executory interests are ordinarily treated as contingent interests because they are subject to a condition precedent and they do not vest until they become possessory. Executory interests are subject to the Rule Against Perpetuities.

Future Interests

Future interests confer rights of possession to property at some point in the future and can be created in the grantor or grantee. A future interest is a presently existing property interest, is always attached to an estate, and gives the owner legal rights.Although a future interest does not entitle the owner to present possession, it is a presently existing interest that may become possessory in the future.

Future Interest in Transferor

Future interests recognized by our legal system include: Interests retained by the transferor: Reversion Possibility of Reverter Right of Entry (or power of termination)

Shifting Executory Interest

Must divest an interest in another transferee to become possessory. Therefore, it cuts off the interest of the grantee and occurs when a third party takes the property on the happening of a condition subsequent.

Springing Executory Interest

Must divest the transferor in the future to become possessory. Therefore, it cuts off the interest of the grantor and occurs after a gap in time (ex. "To A then to B one year after A's death" or "To A and his heirs 20 years after the date of this deed).

Possibility of Reverter

Possibility of reverter arises when an owner carves out of his estate a determinable estate of the same quantum. The possibility of reverter is a future interest remaining in the transferor or his heirs when a fee simple determinable is created. Release: Release is a transfer of an interest to one party only, the possessory party. A party can own a possibility of reverter on an interest that is possessed by another person, which can be released, therefore releasing the party's possibility of reverter and giving the possessory party a fee simple absolute.

Right of Entry

Right of entry occurs when an owner transfers an estate subject to condition subsequent and retains the power to cut short or terminate the estate. A right of entry is transferred to a third party, but cannot be created. These very same interest, if created in a third party, would be an executory interest. Note that there is a difference between creation and transfer.

Future Interest in Transferee

There are three types of future interests that are retained by the transferee: Vested Remainder Contingent Remainder Executory Interest A remainder or executory interest cannot be retained by the transferor and is only created in transferees. Once created, a remainder or executory interest can be transferred back to the grantor, but the name originally given the interest does not change.