Present Estates and Future

Interests
Part 2
 Future Interests

The Summing Rule: All present and future

interests must add up to a fee simple absolute.
Thus, you should read the estates created as a
sequence of interests extending infinitely into
the future. Following any estate less than fee
simple absolute, there must be other interests
that will become possessory in the future –
these are “future interests”.

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 Future Interests
All future interests are either:
retained by the grantor (“reversions”
or “possibility of reverter” or “power
of termination”) or
created in a third party (not the
grantor and his heirs) – these are
either “remainders” or “executory
interests.”
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 Future Interests Held
by the Grantor

1. Reversion
2. Possibility of Reverter
3. Power of Termination (or
Right of Reentry)
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 Future Interests
In a Third Person

1. Vested Remainders
a) Remainders absolutely vested (or “indefeasibly vested”)
b) Vested remainders subject to partial divestment (or
“subject to open”)
c) Vested remainders subject to complete divestment
2. Contingent Remainders
3. Executory Interests
a) Shifting executory interests
b) Springing executory interests

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 Reversion

The future interest held by a grantor

who transfers an estate the duration
of which is conceptually shorter than
his original estate, and he does not
designate another party as the next
taker; i.e., the grantor conveys a
lesser estate than the one he owns.
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 Reversion

Example 10: O, who owns Blackacre in fee

simple absolute, grants a life estate to A.
E.g., “O to A for life.”
A has a life estate;
O has a reversion that becomes possessory at
A’s death. O’s reversion is in fee simple
absolute.
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 Reversion

O’s reversion is said to “wait patiently”

until A’s possessory estate “ends
naturally” with A’s death.
O’s reversion does not interrupt or cut
short A’s possessory estate, causing it
to end earlier than it otherwise would.
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 Reversion

Example 11: O owns a life estate in Blackacre and

grants A an estate in Blackacre for a two-year
term.
E.g., “O grants his life tenancy to A for two years.”

Since O transferred A an estate for years , regarded as conceptually

shorter than O’s original life estate, O has retained a reversion in
Blackacre. The reversion is not in fee simple absolute – the reversion
is in a life estate (measured by O’s life).

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 Possibility of Reverter

A possibility of reverter is the future

interest retained by the grantor of a fee
simple determinable or a determinable life
estate.
The possibility of reverter ripens into a
possessory estate upon the occurrence of
the determining (or triggering) event.

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 Possibility of Reverter

Since A’s estate will end automatically if the

determining event occurs, we say that O’s
possibility of reverter “waits patiently” to
see if the event will occur.
 A possibility of reverter is speculative, it
may or may not occur, whereas a
reversion is definite and will always occur.
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 Possibility of Reverter

Example 12: O grants Blackacre to A as long as the land

is farmed.
O’s future interest (which becomes possessory if and
when the land is not farmed) is a possibility of reverter –
it is not a reversion because it is speculative and may
never happen.
 O’’s possibility of reverter is in fee simple absolute
because there are no restrictions on O’s use of the land
once it is returned to O.
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 Power of Termination

A power of termination (or right of re-entry) is

the future interest created in the grantor of a fee
simple subject to a condition subsequent.
A legal action to recover the property is generally
required for O to regain possession (i.e., O must
sue the holder of the fee simple subject to
condition subsequent to retake possession after
the triggering event occurs).
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 Power of Termination

Unlike a possibility of reverter or

reversion, O’s power of termination
interrupts the prior estate if the triggering
event occurs. The grantor must take
some action to enforce the power to
terminate the possessory estate of the
prior holder and enter the property.

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 Power of Termination

Example 13: O to A, but if the land is not

farmed, then O may reenter and claim the
land.
O has the power to terminate A’s interest
but O must affirmatively take court action
to recover the land – it is not automatic.
The conveyance must expressly mention the
right of reentry (or right to terminate).
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What is the nature of the grantor’s
reversionary interest?

It is not enough to identify that the grantor, O, has a

future interest (either a reversion, a possibility of reverter,
or a power of termination). We must also identify what is
the nature of the title when and if O recovers the
property in the future:
 Fee simple absolute
 Fee tail
 Life estate
 Term of years
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 Examples

O to A, but if the land is not farmed, then O may

reenter and claim the land.
 A has fee simple subject to condition subsequent
 O has power of termination (or right of reentry)
in fee simple absolute because when O steps in
to terminate A’s interest and retakes
possession of the land, O will hold the land in
fee simple absolute

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 Examples

“O to A as long as the land is farmed.”

 A has a fee simple determinable
 O has a possibility of reverter in fee
simple absolute because when O retakes
the property automatically by operation
of law O will hold it in fee simple
absolute.
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 Future Interests
In A Third Person

1. Vested Remainders
a) Remainders absolutely vested (or “indefeasibly vested”)
b) Vested remainders subject to partial divestment (or
“subject to open”)
c) Vested remainders subject to complete divestment
2. Contingent Remainders
3. Executory Interests
a) Shifting executory interests
b) Springing executory interests

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 Remainders

A remainder is a future interest created in a

third person (i.e., not the grantor) that is
capable of taking effect after the natural
termination of a preceding estate, and where
both present and future interests were created
in the same disposition or instrument.
 A future interest given to third party following a life
estate is always a remainder.
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 Remainders

Example 14: O to A for life, then

to B and his heirs.
A has …
B has …
O has …
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 Remainders
Example 14: O to A for life, then
to B and his heirs.
A has a life estate;
B has a remainder in fee simple absolute. It is a
remainder because upon the natural termination
of A’s life estate (at A’s death), B will be entitled
to possess and enjoy the property; B’s remainder
is in fee simple absolute because there are no
limitations on B’s ownership once it becomes
possessory; the remainder is to “B and his heirs”
i.e., to B “in fee simple absolute.”
O has nothing.
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 Remainders
Example 15: On Monday, O conveys
Blackacre “to A for life.” On Wednesday, O
conveys “all of my right, title and interest
in Blackacre” to B.
A has …
On Monday, O has ….
On Wednesday, O has …
On Wednesday, B has …
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 Remainders
Example 15: On Monday, O conveys
Blackacre “to A for life.” On Wednesday, O
conveys “all of my right, title and interest
in Blackacre” to B.
 A has a life estate
 On Monday, O holds a reversion in fee simple absolute.
 On Wednesday, O transferred his interest, a reversion, in
Blackacre to B. B does not have a remainder because B’s
future interest was not created in the same disposition
that created A’s life estate.

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Remainder vs. Reversion

 Remainder – a future interest created when a

grantor conveys an inherently limited possessory
estate to one grantee and, in the same conveyance,
conveys the future interest to a third party grantee.
 Reversion – a future interest created when a grantor
conveys an inherently limited possessory estate and
retains the future interest rather than conveying it to
a third party grantee.

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 Requirements of a Remainder
1. Remainder must be in favor of a
transferee who is one other than
the grantor; and
2. Remainder must be created at
the same time and in the same
instrument as the prior estate
that supports it; and

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 Requirements of a Remainder
3. The remainder must take effect as a
present interest in possession
immediately upon the natural
termination of the prior estate; and
4. The prior estate must be an estate of
lesser duration than the interest of the
grantor at the time of conveyance.
Therefore, a remainder can never follow
a fee simple absolute, which has an
infinite duration.
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 Remainders

Two types:
Vested Remainders – certain to
become possessory
Contingent Remainders – not
certain to become possessory
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 Three Types of
Vested Remainders
1. Remainders absolutely vested
• The remainder is granted to an
ascertained person(s); one who is
born and identifiable, and
• The remainder is not subject to a
condition precedent other than
the natural termination of the
preceding estate.
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Absolutely Vested Remainder

Example 16: O to A for life, then to

B and her heirs.
 A has a life estate;
B has a vested remainder in fee simple
absolute -- at A’s death B (or B’s heirs)
automatically take the property in fee simple
absolute, without having to satisfy any
precondition other than waiting for A to die.
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 Absolutely Vested Remainder
Example 17: O to A for life, then to B
and her heirs, but if B, after
obtaining the property, dies and
leaves no surviving children, then to
C and her heirs.
A has …
B has …
C has …
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 Absolutely Vested Remainder
Example 17: O to A for life, then to B and her heirs, but if
B, after obtaining the property, dies and leaves no
surviving children, then to C and her heirs.
 A has a life estate;
 B has a vested remainder in fee simple subject to
executory limitation – B has a “vested
remainder” because B is ascertained and there is
no precondition other than waiting for the
natural termination of A’s life estate at A’s death.
Once A dies and B gets the property, if B dies
without children, C will cut off the interest of B’s
heirs and the entire estate will go to C (a third
party) and her heirs in fee simple absolute;
 C has an executory interest in fee simple
absolute.
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 Types of Vested Remainders
2. Vested remainder subject to partial
divestment (also called “vested remainder
subject to open”) – the future interest
following a life estate that applies to “class
gifts” where at least one of the remainderman
is ascertained (i.e., born and identified) (this
makes it “vested”); but that person may have
to share the property (“partial divestment”) if
other members of the class are born after the
time of the conveyance.
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 Vested Remainder Subject to Partial
Divestment (or “Subject to Open”)
Example 18: O to A for life, then to the
children of A in fee simple absolute. At the
time of O’s death, A has one child, B.
A has …
B has …

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 Vested Remainder Subject to Partial
Divestment (or “Subject to Open”)
Example 18: O to A for life, then to the
children of A in fee simple absolute. At the
time of O’s death, A has one child, B.
 A has a life estate;
 B has a vested remainder subject to partial
divestment; ‘vested’ because B is in existence and
identified (i.e., ascertained) and there is no
precondition, so B (or her heirs) is certain to
acquire a possessory interest on the expiration of
A’s life estate. But B’s vested remainder is subject
to “partial divestment” (or “subject to open”) if A
has other children during A’s life.
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 Types of Vested Remainders
3. Vested remainder subject to complete
divestment. When the remainder is vested
because the remainderman is ascertained
(born and identified) and his interest is not
subject to a condition precedent, but, prior
to the time it becomes possessory when
the prior estate naturally terminates, his
right of possession is cut off by
 an executory interest, or
 a power of termination.
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Vested Remainder Subject to Complete
Divestment
Example 19: O to A for life, then to B
for life, then to C, but if B sells liquor
on the property, then to D.
 A has …
 B has …
 C has …
 D has …

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Vested Remainder Subject to Complete
Divestment
Example 19: O to A for life, then to B
for life, then to C, but if B sells liquor
on the property, then to D.
 A has a life estate
 B has a vested remainder in a life estate
 C has a vested remainder [in fee simple subject to executory
limitation] subject complete divestment because if B sells
liquor, it will happen, if at all, during B’s life and before C’s
interest becomes possessory, and C will lose the property to
D’s executory interest before C ever possessed it. C does not
have a contingent remainder because there is nothing C can
do to satisfy or not satisfy the contingency – it is all in B’s
“hands.”
 D has an executory interest in fee simple absolute.
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 Contingent Remainders

 A remainder that is not vested

because it has been created in
favor of an unascertained person
or is subject to a condition
precedent before becoming
possessory.
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Is the Remainderman Ascertained?

a. O to A for life, then to B

b. O to A for life, then to A’s first child (A has no children)
c. O to A for life, then to A’s first child (A has one child, B).
d. O to A for life, then to A’s Property professor (A is taking
Property at the time of conveyance)
e. O to A for life, then to the person who is teaching
Property at GGU Law.
f. O to A for life, then to A’s widow.
g. O to A for life, then to B’s heirs.

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 Condition Precedent

A condition precedent is a condition other

than the natural termination of the prior
estate that must happen before the
remainder becomes possessory.
 Remainders can be contingent for more than one
reason. E.g., because the holder is unascertained
and because a condition precedent remains
unsatisfied. Both contingencies must be resolved
for the remainder to vest.

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 Condition Precedent
Example 20: O to A for life, then to B if
B has reached age 21.
A has …
B has ...
O has …

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 Condition Precedent
Example 20: O to A for life, then to B if
B has reached age 21.
 A has a life estate
 B has a contingent remainder in fee simple
absolute. For B to possess the property, B must
reach age 21 by the time that A dies. Therefore, B’s
remainder contingent because is subject to a
condition precedent. Once B turns 21, when A dies B
will hold in fee simple absolute.
 O has a reversion
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 Contingent Remainders
Example 21: O to A for life, remainder
to B and his heirs if B marries before
A’s death.
A has …
B has …
O has …

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 Contingent Remainders
Example 21: O to A for life, remainder
to B and his heirs if B marries before
A’s death.
 A has a life estate;
 B has a contingent remainder because in
order to take B must satisfy the condition
precedent of marrying before A dies;
 O has reversion, taking back in fee simple
absolute at A’s death if B has not married.
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 Contingent Remainders
Example 22: O to A for life, then to B
for life if B graduates from law
school, then to C and her heirs.
 A has …
 B has …
 C has …

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 Contingent Remainders
Example 22: O to A for life, then to B
for life if B graduates from law
school, then to C and her heirs.
 A has a life estate.
 B has a contingent remainder in a
life estate
 C has a vested remainder in fee
simple absolute.
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Contingent Remainders

Anytime there is a contingent remainder, there must be

someone to take the property if the contingent
remainder fails to vest in time and is destroyed. Where
there is no party named, the default taker is always the
original grantor, O.
“O to A for life, then to B if B has graduated from
college” is interpreted the same as:
“O to A for life, then to B if B has graduated from
college, otherwise to O.”
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Alternative Contingent Remainders
Contingent remainders are
“alternative” when they each follow
the same estate and when their
conditions precedent are the opposite
of each other, so that the vesting of
one precludes the vesting of the
other.

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Alternative Contingent Remainders
Example 23: O to A for life, then to B if B
has graduated from college, but if B has
not graduated from college, then to C.
 A has a life estate
 B has a contingent remainder in fee simple
absolute.
 C has an alternative contingent remainder
in fee simple absolute

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Alternative Contingent Remainders

Example 23: O to A for life, then to B if B has graduated

from college, but if B has not graduated from college,
then to C.
 Under no circumstances can the property go to both B and C – if it
goes to one it will not go to the other. At the end of A’s life estate,
C’s interest does not follow B’s interest chronologically.

 Rather, C’s interest is an alternative to B’s interest, and the same

contingency will dictate the fate of each interest – both future
interests are contingent upon whether B graduates from college.

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 Contingent Remainder vs. Vested
Remainder Subject to Divestment

Example 24: “To A for life, remainder

to A’s surviving children.”
Creates a contingent remainder in A’s
children since the condition of survival
is a condition precedent to the gift to
the children.

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 Contingent Remainder vs. Vested
Remainder Subject to Divestment
Example 25: To A for life, then to A’s children, B, C, and D,
but if any such child fails to survive A, such child’s share
shall be given to his or her issue.
 B, C, and D have vested remainders subject to complete
divestment. The remainder is first given to B, C, and D
(they are ascertained ) and then, under the “but if”
language, taken away if B, C, or D do not survive A, which
will happen, if at all, during A’s life prior to the time the
property interest otherwise would pass to B, C, and D.
So, B, C, and D have a vested remainder, but it could be
entirely taken away based on a subsequent condition.
 The issue of B, C, and D have executory interests since
their gifts cut short the gifts to B, C, or D.
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 Contingent Remainder vs. Vested
Remainder Subject to Divestment

O to A for life, then to B and her heirs if A graduates from law

school
Contingent remainder - A’s graduation is a condition precedent
to B’s possession
O to A for life, then, if A graduates from law school, to B and
her heirs.
Contingent remainder
O to A for life, then to B and her heirs, but if A fails to
graduate from law school, then to C and her heirs.
Vested remainder subject to complete divestment because
there is no condition precedent and the divesting event happens
before the remainderman possesses
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 Contingent Remainder vs. Vested
Remainder Subject to Divestment
Compare: If the condition may occur only
after the remainder becomes possessory,
the estate is a vested remainder in fee
simple subject to an executory limitation.
 O to A for life, then to B and her heirs, but if B sells
alcohol on the land, then to C and her heirs.
Vested remainder in fee simple subject to an
executory limitation
 O to A for life, then to B and her heirs, but if A sells
alcohol on the land, then to C and her heirs.
Vested remainder subject to complete divestment
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 Executory Interests

A future interest created in favor of a

grantee that becomes possessory, if at
all, on the happening of the contingency.
It is always in favor of a transferee, never
the grantor (it is never a reversion)
It is always contingent, not vested

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 Executory Interests

It must take effect either

 before the natural termination of the preceding
estate (thereby divesting it and cutting it short) or
 after the termination of the preceding estate.
 Any grant following a fee estate to a third
person is always an executory interest and
not a remainder.

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 Shifting Executory Interests
Shifting executory interests
always divest a prior grantee
(not a grantor) – it cuts short
or terminates a preceding
estate in favor of another
grantee.

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 Shifting Executory Interests
Example 26: O to A for life, but if A becomes
bankrupt, then to B and his heirs.
 A has a defeasible life estate; that life estate is cut short
(before its natural termination at A’s death) if A becomes
bankrupt, and then passes to B in fee simple absolute;
 B has a shifting executory interest in fee simple absolute; B
does not have a remainder because B’s interest will become
possessory only if A becomes bankrupt and not when A
dies.
 O has a reversion in fee simple absolute, which is
possessory if A dies without becoming bankrupt.

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Springing Executory Interests

A springing executory interest

always divests the grantor – it is an
estate created to begin in the
future and cuts short or terminates
a reversion held by the grantor.

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 Springing Executory Interests
Example 27: O to A for life, and one
year after A’s death to B and his heirs.
 A has a life estate;
 O has a reversion for a term of one year
 B has a springing executory interest in fee
simple absolute that terminates O’s
reversion one year after A’s death.

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Future Interests Must Be Classified in
Order

 Future interests are classified clause by clause – this means

that the label given to the first future interest created in a
disposition will determine the label to be given to a
second future interest created in the same disposition.
 E.g, if the first future interest is a contingent remainder,
subsequent future interests must also be contingent
remainders.
 E.g., if the first future interest is a vested remainder
subject to complete divestment, the following future
interests will be executory interests.

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Future Interests Must Be Classified in
Order

Example 28: O to A for life, and on A’s death to B if B

survives A; but if B does not survive A, on A’s death to C.
 A has a life estate
 B has a contingent remainder since B’s taking is subject to a
condition precedent that B must survive A in order to take. B’s
interest is not a vested remainder subject to complete divestment
because the contingency is expressed as a condition precedent
(rather than “then to B, but if B dies before A . . .”)
 C has an alternative contingent remainder in fee simple absolute
– the same contingency (B’s survival) affects B’s interest and C’s
interest.

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 Future Interests Must Be Classified in
Order
Example 29: O to A for life, and on A’s
death to B. But if B predeceases A, on
A’s death to C.”
A has a life estate
B has a vested remainder subject to complete divestment
because the contingency is a condition subsequent that will
divest B of the remainder prior to the time B could possess it.

C has a shifting executory interest in fee simple absolute.

Since the prior interest (B’s) is a vested remainder in fee
simple absolute, it cannot be followed by another remainder,
so C’s interest must be characterized as an executory
interest; it is shifting because the interest comes from B to C
rather than from O to C.
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 Real World Problems

Frank owns a small house that he presently uses

as a rental unit. His daughter has just graduated
from college, and he wants to give it to her as her
first home. However, she isn’t married yet, and he
hasn’t really approved of most of her boyfriends.
Frank wants to be able to take the house back if
she should marry someone he thinks is unsuitable
for her. How would you advise him?

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 Real World Problems

Rebecca’s husband devised to her a life estate in the house he

owned at his death. He devised all of the rest of his property to his
son by his first marriage, Bob. Rebecca has been living in the
house for the 10 years since he died. However, she is beginning to
have health problems, and wants to move to a town where her
daughter lives. Yesterday, she put a “For Rent” sign in the front
yard, and last night Bob called her. He said that she could not rent
the house, and that if she were to move out, the house would go
to him. Rebecca is concerned because she needs the rental
income from the house for her apartment in her daughter’s town.
Is Bob right?

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 Real World Problems

Susan has been diagnosed with a terminal illness, and

wants to arrange her financial affairs in preparation for
her death. She and her husband live in her parents’
house, which they devised to her when they died.
Susan owns the house in fee simple, and wants to be
sure that her husband, who is disabled, can live in the
house for the rest of his life. Upon his death, she
wants the house to go to her son by her first marriage.
Can she do this?
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