A future interest, in property terms, is the reversion to you of ownership in property you deeded to someone else for a limited length of time. Your right to possession of the land is a future right as opposed to a present right.
For example:
You deed property that you own over to your mother until her death. At her death, possession returns to you if you are still alive. You have an interest in the property that will be realized as a future time.
This is a very simplistic explanation of a matter of property ownership that can get complicated quickly depending on the type of deed and how the future interest is structured. There are both active and passive future interests which are differentiated by when possession takes place: at the termination of a life estate (the person with possession dies) or when a particular condition is met that reverts possession to the original owner prior to termination of life estate.
Passive Future Interests
A passive future interest is one that follows what is called a “natural termination of a life estate.” This means the person in possession has the right to live in, on, or use the property during his or her lifetime. However, this person does not have the right to sell the property or to will it to someone else after death. Possession of the property goes into what is called reversion or remainder.
Reversion means possession of the property goes back to the “grantor,” the person who owns it or originally granted to future interest to the current holder. This is what happened in the example above.
Remainder is when the property passes to someone else other than the grantor after the first grantee dies. A remainder can be termed in one of two ways:
- Contingent Remainder: This occurs when the identity of the person who is to take possession next is in question or that there is a question about whether or not the person will take possession. This generally occurs due to legal documentation rather than outright missing information. A second grantor may be named in a will but their identity won’t be known until the will is read. Or there could be a contingency that the second grantee will take possession if still living otherwise a completely different grantee takes possession; also unknown until the first grantee dies.
- Vested Remainder: This is where a future interest goes to a known grantee after death of the first. There can be no conditions placed on the remainder for it to be considered vested. There are three types of vested remainder:
- Indefeasibly Vested: the remainder is permanently vested to a known grantee and cannot be taken away.
- Vested, Subject to Open: the remainder is vested to a known grantee but others could be added (aka Vested, Subject to Partial Divestment).
- Vested, Subject to Divestment: This one can get complicated in a hurry. In this case, at least one grantee is known but a situation can occur that takes possession away from them, known as “divesting” them of the property.
Active Future Interests
In an active future interest, possession can return to the grantor before termination of the grantee’s life estate due to some condition.
Executory Interest is an active future interest. Possession will pass to someone else if a certain event occurs before the current grantee dies. And the original grantor may regain possession due to a triggering event.
- Right of Entry: aka power of termination. A condition of possession has been set. If the grantee breaks the condition, the grantor can reclaim possession. This is active in that the grantor must take steps to repossess the property; it won’t happen automatically just because the condition has been broken.
- Possibility of Reverter: In this case grantor repossession does occur automatically if a condition is broken.
Future interests can seem to have a lot of moving parts. The more people and conditions involved, the more complicated it gets. But a form of future interest can be a great tool for controlling who gets the right to use a particular property over time.
