Future Interests in Estates under Trusts and Estates
Future Interests in Estates
In property law, a future interest is a legal right to property ownership that will begin in the future, rather than immediately. These arise primarily in the context of estates and trusts, where the present estate holder may only have a present interest (like a life estate), and another party holds a future interest that will become possessory later.
Types of Future Interests
Future interests can be broadly classified into two categories based on who holds them:
Future Interests in the Transferor (Grantor or Testator)
These are interests that remain with the person who created the estate (the grantor or testator) after they convey or devise a lesser estate to another.
Reversion: When the grantor transfers a lesser estate (e.g., life estate) and keeps the future interest to regain possession afterward.
Example: "To A for life, then back to O."
Possibility of Reverter: Arises with a fee simple determinable. If a condition is broken, property automatically reverts to grantor.
Example: "To A so long as the land is used for farming."
Right of Entry (Power of Termination): Associated with a fee simple subject to condition subsequent. The grantor can reclaim the property by taking action after a condition is broken.
Example: "To A, but if alcohol is sold on premises, grantor may re-enter."
Future Interests in a Third Party (Not the Grantor)
These arise when the future interest is held by someone other than the grantor.
Remainder: A future interest that becomes possessory after the natural termination of a prior estate (usually a life estate).
Vested Remainder: When the remainder holder is known and there are no conditions precedent.
Contingent Remainder: When the remainder depends on a condition precedent or the beneficiary is unknown.
Executory Interest: A future interest that cuts short another estate or follows a gap in possession, not naturally following a prior estate. It can be shifting (cutting short a third party) or springing (cutting short the grantor’s estate).
Examples of Future Interests
Reversion: "To A for life." Upon A's death, property reverts to O (the grantor).
Vested Remainder: "To A for life, then to B." B has a vested remainder.
Contingent Remainder: "To A for life, then to B if B graduates from law school." B's remainder is contingent.
Executory Interest: "To A, but if A marries, then to B." B has an executory interest cutting short A’s estate upon marriage.
Key Case Law on Future Interests
Mahrenholz v. County Board of School Trustees, 69 Ill. 2d 456 (1977)
This case explains the nature of executory interests and how they operate to divest a prior estate upon occurrence of a condition.
Wood v. Board of County Commissioners, 120 P.3d 192 (Kan. 2005)
Involved analysis of reversion and possibility of reverter in land conveyed with conditions, emphasizing how future interests operate and the importance of clear conveyance language.
Shelley v. Kraemer, 334 U.S. 1 (1948)
While primarily an equal protection case, it involved racially restrictive covenants, illustrating how future interests in property can be affected by social and legal policy.
Loudon v. Spencer, 19 Va. Cir. 73 (1989)
Clarified distinctions between contingent and vested remainders, emphasizing the need for clarity in future interest creation in wills and trusts.
Application in Trusts and Estates
Wills and Trusts often create future interests to control property succession. For example, a testator might give a life estate to a spouse, with the remainder to children.
Rule Against Perpetuities: This common law rule restricts how long future interests can vest to prevent property from being tied up indefinitely. Contingent remainders and executory interests often trigger this rule.
Summary Table
| Future Interest Type | Held By | When It Becomes Possessory | Example |
|---|---|---|---|
| Reversion | Grantor | Automatically after lesser estate ends | "To A for life, then back to O." |
| Possibility of Reverter | Grantor | Automatically on condition failure | "To A so long as used for farming." |
| Right of Entry (Power of Termination) | Grantor | After condition breach, if grantor acts | "To A, but if alcohol sold, O may re-enter." |
| Vested Remainder | Third party | After prior estate ends | "To A for life, then to B." |
| Contingent Remainder | Third party | Upon condition precedent and prior estate ending | "To A for life, then to B if B graduates." |
| Executory Interest | Third party | Cuts short prior estate upon condition | "To A, but if A marries, then to B." |
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