Legal Definitions - remainder interest

A remainder interest describes a future right to own or possess property, which becomes active only after a preceding, temporary right to that same property has ended. It represents the portion of the property that "remains" for a specific beneficiary once an earlier interest, such as a right to use the property for life or to receive its income for a defined period, has expired.

• Example 1: Family Home

  A parent creates a will stating that their beloved family home should be used by their sibling for the rest of the sibling's life. After the sibling passes away, the home is to be fully transferred to the parent's child. In this scenario, the child holds a remainder interest in the family home. They do not have immediate ownership or the right to live in the home while the sibling is alive. Their right to full ownership "remains" dormant until the sibling's temporary "life estate" (the right to use it for life) concludes.

• Example 2: Investment Portfolio

  An individual establishes a trust fund with a substantial investment portfolio. The trust document specifies that their former university will receive all the annual income generated by the investments for a period of 20 years. After this 20-year period, the entire principal (the original investment amount plus any growth) is to be distributed to a specific charity. The charity possesses a remainder interest in the investment portfolio's principal. For two decades, the university receives the income. The charity's right to the actual investment assets (the principal) is delayed and will only "remain" for them to claim after the university's temporary income interest has terminated.