Legal Definitions - equitable reversion

An equitable reversion refers to the right of an original grantor (the person who created a trust or transferred property into an equitable arrangement) or their heirs to regain the beneficial ownership of property after a specific equitable interest or trust arrangement comes to an end.

Unlike a legal reversion, which deals with the return of legal title, an equitable reversion concerns the return of the beneficial interest in property, often held by a trustee for a specific period or purpose. It is a future interest recognized and enforced by courts based on principles of fairness and justice.

• Example 1: Family Trust for Life Support

  A woman establishes a trust to hold funds that will provide for her elderly mother's living expenses for the remainder of the mother's life. The trust document explicitly states that upon the mother's death, any remaining assets in the trust are to be returned to the woman who created the trust (the grantor).

  How this illustrates equitable reversion: The woman holds an equitable reversion. While a trustee manages the funds for her mother's benefit during her lifetime, the woman retains the beneficial right to have any leftover trust assets revert to her once the trust's primary purpose (supporting her mother) concludes with her mother's passing. The legal title is with the trustee, but the equitable, beneficial interest returns to the grantor.

• Example 2: Conditional Charitable Endowment

  A philanthropic foundation donates a significant sum to a university, establishing a trust to fund a specific research chair for a period of 15 years. The trust agreement includes a clause stating that if the university fails to maintain certain academic standards for that chair during the 15-year period, or once the 15 years have passed, the remaining endowment funds will revert to the philanthropic foundation.

  How this illustrates equitable reversion: The philanthropic foundation possesses an equitable reversion. It has a beneficial interest in the trust funds returning to it under specific conditions (failure to meet standards) or after a defined period (15 years), even though the university (or a designated trustee) holds the legal title and manages the funds for the research chair in the interim.

• Example 3: Minor's Education Trust with Contingency

  A grandfather sets up a trust to pay for his granddaughter's college education, with the stipulation that the funds are to be used until she completes her undergraduate degree or reaches the age of 23, whichever comes first. The trust document further specifies that if the granddaughter were to pass away before completing her degree or reaching 23, any unused funds in the trust would revert to the grandfather's estate.

  How this illustrates equitable reversion: The grandfather's estate holds an equitable reversion. It has a beneficial right to the trust assets returning to it if a specific contingency occurs (the granddaughter's death before the trust's primary purpose is fulfilled). The trustee manages the funds for the granddaughter's benefit, but the equitable interest in the remainder reverts to the grantor's estate under the specified conditions.