Future Interests

A future interest is the right to possession of property at some point in the future. A future interest can be created in the grantor or grantee.

 

Capable of Creation in Grantor

1. Possibility of reverter: This interest is only created by a fee simple determinable.

   1. The grantor does not have to state explicitly that she has a possibility of reverter.

   2. The grantee has a fee simple determinable as long as the condition is met, then the estate automatically ends without any action by the grantor.

      • Example: Olivia conveys Orangeacre with the words “To Arnold, while the property is used as an animal shelter.” As soon as Arnold no longer uses Orangeacre as an animal shelter, his estate ends automatically because Olivia retained the possibility of reverter automatically.

2. Right of entry: This interest is created by a fee simple subject to condition subsequent.

   1. The grantor must state explicitly her right to reenter (also known as power of termination).

   2. The grantee has a fee simple subject to condition subsequent as long as the condition is met, then the grantor must exercise her right of reentry. Right of entry is not automatic.

      • Example: Olivia conveys Purpleacre with the words “To Arnold, but if the property is not used as an animal shelter, then Olivia may reenter and retake the property.” If Arnold stops using the property as an animal shelter, Olivia must act affirmatively upon her right of entry. If Olivia does not act, Arnold’s estate continues.

3. Reversion: This interest is created when the grantor conveys an estate smaller than the estate she holds. The grantor does not have to reserve her future interest expressly.

   • Example: Olivia conveys Grayacre with the words “To Arnold for life.” Olivia had a fee simple absolute and conveyed a smaller interest, a life estate, to Arnold. Olivia holds a reversion. Once Arnold dies, Olivia automatically has a fee simple absolute.

 

Capable of Creation in Grantees

Keep in mind that a grantee’s future interest may change over time.

1. Remainders: A remainder is a future interest capable of creation in a grantee that may become a present/possessory estate upon the natural termination of the preceding estate. In order for a remainder to be possible, one instrument (e.g., a deed, trust, will) must create both a present interest and a future interest. A remainder can follow only a life estate, a fee tail, or a term of years because it cannot cut short the preceding estate.

   1. Vested remainder: A vested remainder is created in an ascertainable person and is not subject to a condition precedent.

      1. Indefeasibly vested remainder: The holder of the remainder is certain, and there are no conditions attached.

         • Example: Olivia conveys Brownacre “To Arnold for life, then to Claire.” Arnold has a life estate; Claire has an indefeasibly vested remainder because Claire is an ascertainable person and there are no conditions attached on the remainder (other than the natural termination of the life estate).

      2. Vested remainder subject to defeasance/divestment: The holder of the remainder is ascertainable, but the occurrence of a specified condition could extinguish the remainder.

         • Example: Olivia conveys Greenacre “To Arnold for life, then to Ben and his heirs; but if Ben dies before Arnold, then to Claire and her heirs.” Arnold has a life estate; Ben has a vested remainder subject to divestment because the occurrence of his death before the end of Arnold’s life estate extinguishes Ben’s remainder.

      3. Vested remainder subject to open: The holder of the remainder is a class, for example, “children” or “grandchildren,” but additional members that are not yet ascertainable may be added. The vested remainder subject to open is subject to the Rule Against Perpetuities as long as the class remains open (see Rule Against Perpetuities, below).

         • Example: Olivia conveys Blueacre “To Arnold for life, then to Arnold’s issue in equal shares.” Arnold has a life estate; his issue have a vested remainder subject to open, because as long as Arnold is alive, the class of his issue is still open. If Arnold has five children, then upon his death each will hold a one-fifth share in Blueacre.

   2. Contingent remainder: A remainder is contingent if the person is not ascertainable or the remainder is subject to a condition precedent, or both. A condition precedent is an event that must take place before the remainder becomes a present estate. A contingent remainder is subject to the Rule Against Perpetuties (see Rule Against Perpetuities, below).

      • Example: Olivia conveys Redacre “To Arnold for life, then to Claire and her heirs if Claire reaches the age of 18.” Claire is an ascertainable person, but she must meet a condition precedent—reaching age 18—before her interest will become possessory.

2. Executory interests: An executory interest, unlike a remainder, is a future interest capable of creation in the grantee that cuts short the preceding estate. Executory interests may trigger the Rule Against Perpetuities.

   1. Shifting executory interest: A shifting executory interest cuts short the interest of another grantee.

      • Example: Olivia conveys Orangeacre “To Arnold and his heirs, but if Claire gets married, to Claire and her heirs.” Arnold has a fee simple subject to Claire’s shifting executory interest. Claire’s shifting executory interest will become possessory if she gets married.

   2. Springing executory interest: A springing executory interest cuts short the interest of the grantor.

      • Example: Olivia conveys Yellowacre “To Arnold if he becomes a lawyer.” Olivia has a fee simple subject to Arnold’s springing executory interest. Arnold’s interest will cut short Olivia’s interest and become possessory only if he becomes a lawyer.