Legal Definitions - Remainder (trust law)

In trust law, a remainder interest refers to the portion of trust property that will be distributed to a designated beneficiaryafter an earlier, temporary interest in that property has ended. It represents a future right to receive assets once a preceding condition or time period has concluded, or once another beneficiary's temporary entitlement has expired.

• Example 1: Life Estate in Property

  A wealthy individual establishes a trust, granting their elderly sibling the right to live in a specific vacation home and receive income from a portion of the trust assets for the rest of their life. Upon the sibling's death, the trust specifies that the vacation home and the remaining principal assets are to be distributed to the individual's alma mater.

  Here, the alma mater holds the remainder interest. They will receive the vacation home and the principal assets *after* the sibling's temporary life interest has concluded.

• Example 2: Fixed-Term Income Distribution

  A trust is created to support a beneficiary's education. The trust document states that annual payments will be made to cover tuition and living expenses for four years. After this four-year period, any funds remaining in the trust are to be given to a research foundation.

  The research foundation possesses the remainder interest. Their right to receive the trust funds only vests *after* the educational payments for the primary beneficiary have been completed.

• Example 3: Specific Bequests Followed by Residual Distribution

  A trust document directs the trustee to first distribute $150,000 to a specific charity and then pay a fixed annual sum of $10,000 to a beloved pet sitter for ten years. Once these specific distributions and payments are complete, the trust stipulates that "all remaining assets" are to be transferred to the creator's grandchildren.

  The grandchildren hold the remainder interest. They are the ultimate beneficiaries of the trust's principal, but their entitlement begins only *after* the charity has received its bequest and the pet sitter's ten-year period of payments has concluded.