Legal Definitions - remainder subject to partial divestment

The legal term remainder subject to partial divestment describes a future interest in property where the eventual ownership is certain, but the exact size or share of that ownership can be reduced or diminished by a future event.

To understand this, let's break it down:

• A remainder is a future right to own property (like land or money in a trust) that takes effect after a current owner's right ends. For example, if a will states "to my spouse for life, then to my children," the children have a remainder interest.
• Subject to partial divestment means that while the remainder interest itself is guaranteed to eventually become possessory, the individual share or portion received by a beneficiary might decrease. This typically happens when the group of beneficiaries (often called a "class," like "children" or "grandchildren") is "open," meaning more members can be added to it in the future. As new members join the class, the existing members' shares are proportionally reduced.

Here are some examples illustrating this concept:

• Example 1: Family Trust for Grandchildren

  A wealthy grandparent establishes a trust, stating that the income should go to their child for life. Upon the child's death, the remaining assets in the trust are to be divided equally among "all of my grandchildren." At the time the trust is created, the grandparent has two grandchildren. However, their child is still young and could have more children in the future.

  How it illustrates the term: The two existing grandchildren have a remainder interest in the trust assets. They are certain to receive a share. However, if the child later has a third grandchild, the share of the original two grandchildren will be reduced from one-half each to one-third each. Their individual shares have been "partially divested" by the birth of a new class member.

• Example 2: Real Estate Devise in a Will

  A will specifies that a family vacation home is to be used by the testator's (will-maker's) sister for her lifetime. After the sister's death, the home is to pass to "all of my nieces and nephews." At the time of the testator's death, there are three nieces and nephews. However, the testator's other siblings are still alive and could potentially have more children.

  How it illustrates the term: The three existing nieces and nephews hold a remainder interest in the vacation home. They are guaranteed to inherit it after their aunt's life estate ends. But if, before the aunt's death, another sibling has a child, that new niece or nephew will join the class. This would reduce the share of the original three from one-third each to one-fourth each, demonstrating partial divestment.

• Example 3: Scholarship Fund for Descendants

  An alumnus creates an endowment for their alma mater. The terms state that the fund's income will support general scholarships for 20 years. After 20 years, the principal of the endowment is to be divided equally among "all of my living great-grandchildren." At the 20-year mark, there are five great-grandchildren. However, the terms also specify that the class remains open for an additional five years to include any great-grandchildren born during that period.

  How it illustrates the term: The five great-grandchildren alive at the 20-year mark have a remainder interest in the endowment's principal. They are certain to receive a share. But if, within the subsequent five-year window, two more great-grandchildren are born, the original five's share will be reduced from one-fifth each to one-seventh each. Their individual portions are subject to partial divestment by the expansion of the beneficiary class.