Future Interests

Question 1

What is a future interest?

Answer 1

A present right to possess certain property in the future.

Question 2

What type of future interests can a settlor have?

Answer 2

1. Reversion
   
   1. Right to possess after a finite estate ends
   2. Automatic
   3. Implied if the entire interest is not conveyed
2. Possibility of reverter
   
   1. Pairs with a fee simple determinable
   2. Automatic upon the happening of a specified condition or event
3. Right of reentry
   
   1. Pairs with a fee simple subject to a condition subsequent
   2. Not automatic
   3. Must be enforced after the condition subsequent occurs.

Question 3

What types of future interests can a beneficiary have?

Answer 3

1. Vested remainder
   
   1. Automatic at the expiration of a prior possessory interest
   2. Interest is ascertainable and there is no express condition precedent required before the interest becomes possessory
2. Contingent remainder
   
   1. When there is a condition precedent to possession by the future interest holder OR
   2. When the remainder is given to a person or persons not yet born

Question 4

What future interest can a third-party have?

Answer 4

1. Executory interest
   
   1. Someone other than the grantor has a future interest that can divest a prior possessor before the natural expiration of their interest

Example: “To A for life, then to C, but if B reaches the age of 21 during C’s life, then to B.”

• A: Possessory interest for life.
• C: Vested remainder subject to divestment.
• B: Executory interest

Question 5

What type of remainders are preferred by courts?

Answer 5

Vested remainders.

Question 6

Are contingent remainders destructible?

Answer 6

Yes. If a contingent remainder fails to vest before or at the moment when the preceding estate ends, then it is destroyed.

Example: “To A for life, then to B, if B reaches the age of 21.”

• A has a possessory interest
• B has an unvested contingent remainder.
• If A dies before B turns 21, then B’s interest is destroyed.

Question 7

When will a remainder “accellerate into possession?”

Answer 7

• If it is a vested remainder, then as soon as the preceding estate ends for any reason.
• If it is a contingent remainder, then only when all condition precedents have been satisfied.

Example: Transfer “to A for life, then to B” and A disclaims the interest. B is not technically entitled to the interest because A has not died. HOWEVER, B may be accelerated into possession because he has a vested remainder.

Question 8

Can vested and contingent remainders be transferred?

Answer 8

Yes, both can.