Legal Definitions - executory interest

An executory interest is a type of future right to own property that automatically transfers to a new owner when a specific condition is met. Unlike other future interests that might wait for a natural end to a prior ownership (like someone's death), an executory interest has the power to either:

• Cut short someone else's current ownership of the property (a "shifting" executory interest).
• Take possession directly from the original owner after a period where no one else was designated to own it (a "springing" executory interest).

These interests are held by someone other than the original grantor (the person who initially transferred the property). They are considered "non-vested," meaning they are not guaranteed to happen and are subject to legal rules, such as the Rule Against Perpetuities, which limits how far into the future such interests can be created.

Types of Executory Interests:

1. Shifting Executory Interest

A shifting executory interest occurs when property is given to one person, but if a specific condition happens, ownership automatically transfers to a *third party*, cutting short the first person's ownership. The property "shifts" from one transferee to another.

• Example 1: Conditional Family Transfer

  A will states: "I give my lake house to my son, David, but if David ever sells the property to anyone outside our family, then the lake house shall immediately go to my daughter, Lisa."

  Explanation: David initially owns the lake house. However, if he violates the condition (selling outside the family), his ownership is automatically cut short, and the property "shifts" to Lisa. Lisa holds the shifting executory interest.

• Example 2: Land Use Restriction

  A land developer sells a plot of land to a neighborhood association with a deed clause: "This land is for a community garden only, but if the association ever builds any permanent structures on it, then the land shall automatically transfer to the local conservation trust."

  Explanation: The neighborhood association owns the land for the garden. If they build permanent structures, their ownership is terminated, and the land "shifts" to the conservation trust. The trust possesses the shifting executory interest.

2. Springing Executory Interest

A springing executory interest occurs when property is given to a transferee, but their ownership doesn't begin immediately. Instead, it "springs" out of the original grantor (the person who made the transfer) at a future date or upon a future condition, often after a gap in ownership where the grantor retains control.

• Example 1: Future Commencement of Ownership

  A deed states: "To my grandson, Michael, five years from today."

  Explanation: For the next five years, the property remains with the original owner (the grantor). After five years, ownership automatically "springs" from the grantor to Michael. Michael holds the springing executory interest.

• Example 2: Conditional Future Transfer

  A property owner deeds land "To my niece, Clara, when she graduates from law school."

  Explanation: Until Clara graduates from law school, the property remains with the original owner. Once Clara meets the condition, the ownership "springs" from the original owner to Clara. Clara holds the springing executory interest.