Legal Definitions - remainder (property law)

In property law, a remainder refers to a future interest in real estate that is designated to pass to a third party after the natural end of a preceding property interest, both created within the same legal document (like a deed or a will).

Essentially, someone owns property for a certain period or for their lifetime, and then, without the property returning to the original owner, it automatically transfers to a different, specified individual or group. The preceding interest must be one that can end naturally, such as when a person dies (a "life estate") or when a specific period of years expires.

It's important to distinguish a remainder from a "reversion." A reversion occurs when the property returns to the original grantor (the person who created the interest) or their heirs after the preceding interest ends. A remainder, however, always goes to a new, third party.

There are two main types of remainders:

• Vested Remainder: This is a future interest held by a specific, identifiable person, and there are no conditions that need to be met other than the natural expiration of the preceding property interest. The transfer is certain to happen.
• Contingent Remainder: This is a future interest where either the person who will receive the property is not yet identified, or there is a specific condition that must be fulfilled before they can take possession. If the condition isn't met, or the person isn't identifiable when the preceding interest ends, the remainder might fail.

Here are some examples to illustrate the concept of a remainder:

• Example 1 (Vested Remainder):

  Imagine a wealthy philanthropist, Ms. Albright, creates a trust for her beloved niece. The trust document states, "I grant my mountain cabin to my niece, Clara, for her lifetime. Upon Clara's death, the mountain cabin shall pass to my grandnephew, Daniel."

  How it illustrates the term: Clara holds a "life estate," meaning she has the right to use and enjoy the cabin for the rest of her life. Daniel holds a vested remainder. He is a specific, identifiable person, and his right to the cabin is certain to take effect upon Clara's natural death, with no other conditions attached. Both interests were created in the same trust document.

• Example 2 (Contingent Remainder - Condition):

  Mr. Beaumont's will stipulates, "I leave my family farm to my sister, Eleanor, for her lifetime. After Eleanor's death, the farm shall go to my nephew, Frank, provided that Frank has successfully completed his medical residency by that time."

  How it illustrates the term: Eleanor has a life estate. Frank has a contingent remainder. His right to the farm is dependent on fulfilling a specific condition (completing his medical residency) *before* Eleanor's death. If Eleanor passes away and Frank has not yet completed his residency, his interest in the farm would not take effect, and the property might revert to Mr. Beaumont's other heirs or go to a different designated recipient.

• Example 3 (Contingent Remainder - Unidentified Recipient):

  A deed for an office building states, "To my business partner, George, for a term of 20 years. After the expiration of this 20-year period, the office building shall be transferred to the first of my grandchildren who establishes a successful business generating over $1 million in annual revenue."

  How it illustrates the term: George has an interest for a "term of years." The grandchildren collectively hold a contingent remainder. It is contingent because, at the time the deed is created, it is unknown which grandchild (if any) will be the first to meet the specific business success requirement by the time George's 20-year term expires. The specific recipient is not yet identifiable, and the condition might not be met by any grandchild.