Definition
Future interest refers to an individual’s legal right to possess, use, or enjoy real or personal property at some point in the future. This interest is established in the present but does not grant current possession or enjoyment until a specified event occurs or conditions are met. For example, a legatee who is stipulated to receive income from a trust starting from the age of 21 has a future interest that will convert into a present interest upon reaching that age.
Examples
- Remainder Interest: John’s will states that his property will go to his daughter, Sarah, upon his wife’s death. Sarah has a future interest called a remainder interest, which will become a present interest when John’s wife passes away.
- Executory Interest: In a trust, if it stipulates that properties will transfer to Bob only if he graduates from college by age 25, Bob has an executory interest.
- Vested Interest in Trust: A 40-year-old trust states that the beneficiary, Susan, will inherit assets from the trust when she turns 50. Susan has a future vested interest in the trust’s assets.
Frequently Asked Questions (FAQs)
What is a future interest in property law?
Future interest in property law refers to the right to possess or enjoy a property in the future, based on terms set forth in a will, trust, or legal agreement.
When does a future interest become a present interest?
A future interest becomes a present interest when the conditions specified (such as reaching a certain age, death of a life tenant, or completion of an event) are met.
What are the types of future interest?
Types of future interest include remainder interests, executory interests, and vested interests.
Can future interest be transferred or sold?
Generally, future interests can be transferred or sold unless there are specific restrictions set by the original property owner or through legal stipulations.
Does a future interest have current value?
The value of a future interest depends on factors such as the probability of the condition being fulfilled, the timing, and the present value of the future benefits.
Related Terms
- Present Interest: Immediate rights to possess or enjoy property.
- Remainder Interest: A future interest given to a person (remainder beneficiary) which comes into effect after the end of a prior interest.
- Executory Interest: A future interest that will divest (cut short) another interest or some other interest in the future.
- Vested Interest: A secured interest in an asset or property that becomes available upon meeting certain conditions.
Online References
- Investopedia: Future Interest Definition
- Nolo’s Plain-English Law Dictionary: Future Interest
- Cornell Law School: Future Interest
Suggested Books for Further Studies
- “Future Interests” by John A. Borron Jr.
- “Wills, Trusts, and Estates” by Dukeminier, Sitkoff
- “The Law of Future Interests” by Lewis M. Simes
- “Understanding Property Law” by John G. Sprankling
Fundamentals of Future Interest: Property Law Basics Quiz
### What is a future interest in property law?
- [x] A legal right to possess or enjoy property in the future.
- [ ] Immediate rights to possess property.
- [ ] Ownership rights of property in the present.
- [ ] Temporary possession of the property.
> **Explanation:** A future interest is the legal right to possess or enjoy property at a future date or upon the occurrence of specified events or conditions.
### Which of the following is an example of a future interest?
- [ ] Ownership of a house you currently live in.
- [ ] Renting an apartment.
- [x] A remainder interest that will become effective after a life estate ends.
- [ ] Holding a mutual fund account.
> **Explanation:** A remainder interest that becomes possessory after a life estate ends is a future interest because the property interest will vest in the future, not immediately.
### Can a future interest be transferred?
- [x] Yes, generally future interests can be transferred.
- [ ] No, future interests cannot be transferred until they become present interests.
- [ ] Only executory interests can be transferred.
- [ ] Future interests must always stay with the original beneficiary.
> **Explanation:** Generally, future interests can be transferred unless restricted by legal conditions or the original terms set forth by the property owner.
### Which type of future interest might cut short another interest?
- [ ] Remainder interest
- [ ] Vested interest
- [x] Executory interest
- [ ] Joint tenancy
> **Explanation:** An executory interest might cut short another interest, as it takes effect upon the occurrence of a specified event that divests another interest.
### What must occur for a future interest to become a present interest?
- [x] The specified events or conditions must be met.
- [ ] The property owner must consent.
- [ ] The future interest automatically becomes present one year later.
- [ ] Legal permission from a court.
> **Explanation:** The specified events or conditions stipulated in the future interest agreement must occur for the future interest to become a present interest.
### Which type of interest is held by a person who receives property only after another’s life estate ends?
- [x] Remainder interest
- [ ] Present interest
- [ ] Executory interest
- [ ] Joint tenancy
> **Explanation:** A person holding a remainder interest receives the property after the termination of the prior estate, such as a life estate.
### What does it mean if the future interest is vested?
- [x] The right to property is secured upon meeting certain conditions.
- [ ] The property can be used immediately.
- [ ] The interest is uncertain or not determined.
- [ ] The property can never be transferred.
> **Explanation:** A vested interest is a secured right to property that the beneficiary will obtain upon fulfilling predefined conditions.
### Which future interest comes into effect if a gift is conditioned upon an individual graduating from college by age 25?
- [ ] Remainder interest
- [ ] Vested interest
- [x] Executory interest
- [ ] Present interest
> **Explanation:** This is an executory interest because it depends on the condition (graduation by age 25), and it comes into effect if the condition is fulfilled.
### A future interest becomes a present interest when...
- [ ] It is stated in the will.
- [ ] The original owner transfers the property.
- [x] Specific conditions or events occur, as outlined in the agreement.
- [ ] The interest holder decides.
> **Explanation:** A future interest becomes a present interest when the specified conditions or events occur as outlined in the agreement or legal document.
### Future interests are typically used for what legal purpose?
- [x] Estate planning and inheritance.
- [ ] Immediate property leasing.
- [ ] Short-term property rentals.
- [ ] Insurance for movable property.
> **Explanation:** Future interests are often used in estate planning and inheritance to dictate how property will be distributed and pass on after certain conditions are met.
Thank you for exploring the concept of future interest in property law through our comprehensive glossary and challenging sample quiz questions. Continue to develop your expertise in estate planning and property law!
