Legal Definitions - defeasible remainder

A defeasible remainder refers to a future right to receive property (such as land or money) that has already been granted, but which can be lost or taken away if a specific event or condition occurs after the right was initially established. It's a future interest that is not absolutely guaranteed because its continued existence depends on certain conditions being met or, more commonly, certain conditions not happening. If the specified condition occurs, the person holding the remainder interest loses their claim to the property, and it typically passes to someone else.

Here are some examples to illustrate this concept:

• Real Estate Inheritance: Imagine a will that states, "My country estate shall pass to my son, Robert, after his mother's death. However, if Robert ever permanently moves out of the country, the estate will instead go to my daughter, Lisa."

  In this scenario, Robert has a defeasible remainder interest in the country estate. He is designated to receive the property after his mother passes away. However, his right to the estate is "defeasible" because it can be lost if he permanently moves out of the country (the specified condition). If that condition occurs, his interest is "divested," and Lisa would then receive the estate instead.

• Trust for Education: A wealthy grandparent sets up a trust with the provision, "Upon my daughter's death, the remaining trust funds shall be distributed to my grandson, Michael, provided that Michael has successfully completed a four-year university degree by that time. If he has not, the funds shall instead be donated to the local animal shelter."

  Michael holds a defeasible remainder interest in the trust funds. He is set to receive the funds after his mother's death. However, his right is conditional; it will be defeated if he fails to meet the requirement of completing a four-year university degree by the time his mother dies. If he doesn't meet this condition, his interest is divested, and the animal shelter receives the funds.

• Business Ownership: A family business owner's will stipulates, "My shares in the company will pass to my nephew, David, upon my retirement. However, if David ever sells his other shares in the company to an outside party, his inherited shares will immediately transfer to my other niece, Emily."

  David has a defeasible remainder interest in the company shares. He is set to receive them when his uncle retires. This interest is defeasible because it can be lost if he sells his *other* shares to an outside party (the specified condition subsequent). If that condition occurs, his remainder interest in the inherited shares is divested, and Emily would receive them instead.