Remainder Interest

Remainder interest refers to the future interest in an estate that becomes possessory when a preceding life estate or similar limited estate terminates. The holder of this interest is called the remainderman.
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Definition

Remainder interest is a form of future interest in property law that entitles the holder, known as the remainderman, to an estate after the termination of a preceding estate, typically a life estate. This type of interest comes into effect automatically upon the expiration of the prior estate, without the need for any additional legal conveyance.

Examples

  1. Life Estate & Remainder: A person, Mr. Smith, conveys a life estate to Mrs. Johnson, meaning she has the right to live in the property for her lifetime. Mr. Smith stipulates that upon Mrs. Johnson’s death, the property will pass to his daughter, Ms. Anderson. Here, Ms. Anderson is the remainderman with a remainder interest.
  2. Testamentary Trust: In a testamentary trust, a parent leaves a property in trust to be managed for the benefit of their spouse during the spouse’s lifetime (life estate). Upon the spouse’s death, the property passes to the children, who hold a remainder interest.

Frequently Asked Questions

Q1. How is remainder interest different from a reversionary interest? A1. A reversionary interest is retained by the original grantor after conveying a lesser estate, while remainder interest is granted to a third party who takes possession after the termination of the prior estate.

Q2. Can a remainderman sell their interest? A2. Yes, a remainderman can sell their remainder interest, although the buyer holds the interest subject to the life tenant’s rights.

Q3. Is remainder interest subject to estate taxes? A3. Yes, remainder interests can be subject to estate and inheritance taxes, depending on jurisdiction and the value of the estate.

  • Life Estate: A type of property ownership that lasts for the life of a specified individual, called the life tenant.
  • Reversionary Interest: The interest that returns to the grantor after a certain period or condition is met.
  • Fee Simple: The most extensive interest in property, typically without limitations on its use or transfer.
  • Trust: A fiduciary relationship where one party holds property on behalf of another party.

Online References

Suggested Books for Further Study

  • “Principles of Property Law” by Joseph William Singer: A comprehensive source for understanding property interests, including remainders.
  • “Wills, Trusts, and Estates” by Robert H. Sitkoff and Jesse Dukeminier: An in-depth look at estate planning techniques.
  • “Real Estate Law” by Marianne M. Jennings: This book covers various aspects of real estate law, including future interests like remainder interest.

Fundamentals of Remainder Interest: Real Estate Basics Quiz

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Thank you for exploring the fundamentals of remainder interest. Mastery of property law concepts can significantly enhance estate planning and management.

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