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What is a Future Interest?

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  • Written By: John Kinsellagh
  • Edited By: Michelle Arevalo
  • Last Modified Date: 06 November 2016
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    Conjecture Corporation
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Under the principles of Anglo-American real property law, a future interest is a legal right to property that vests at some point in the future. The recognized right to the future use or enjoyment of the property interest is frequently created by the disposition of the property owner’s estate to designated beneficiaries through his last will and testament, or through the creation of a trust. The various rights created in the property can vary, and may be triggered on the occurrence of a specified event.

The extent of a beneficiary’s right in a future interest in property can be either the outright transfer of title to the property, or it can be a more limited right to possession, such as a life estate. For example, if O, the owner of Blackacre, grants the property to A for life, A is given a life estate; and upon A’s death, the property reverts back to O or his estate. In this example, A has a legal right to possession, but can never sell the property since title to the land remains with O, the owner.

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In this situation, a remainder is a future interest that is granted to a third party upon either the termination of a life estate to the original grantee, or upon the occurrence of a particular event. If O grants property to A for life, and then to B; A is given a life estate, and upon his death, the property is transferred outright to B. Remainders are characterized as either vested or contingent.

A vested remainder is a future interest that takes effect upon the death of the grantee. If O transfers Blackacre to A for life, and then to B; B has a vested remainder in the property. This is because, upon the death of A, the property will vest in B with no further conditions.

A contingent remainder is an interest in property that may vest depending on the fulfillment of a certain condition or precedent. A grant from O to A, then to B — if B has children — would be characterized as a contingent remainder. This is due to the fact that B takes the land, after A dies, but only if B has offspring.

In some cases, a future interest will revert back to the grantor. If O grants Blackacre to B for life, when B dies, the property reverts back to O or to his estate. If O grants Blackacre to A for life so long as A grows crops on the land; if A grows crops, upon A’s death, the property becomes part of A’s estate. If A does not grow crops on the land, upon A’s death, the property or estate reverts back to the original owner, O, or to his estate.

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