Remainder Interest
A remainder interest is a future ownership interest in property that becomes possessory after a life estate terminates, allowing the remainderman to receive full ownership when the life tenant dies.
Exam Tip
Remainder = future interest taking effect after life estate ends. Remainderman gets property when life tenant DIES. Vested = certain; Contingent = condition must be met.
What is a Remainder Interest?
A remainder interest is a future interest in real property that takes effect when a prior estate (typically a life estate) ends. The person holding the remainder interest is called the "remainderman" and will receive full ownership of the property when the life tenant dies.
How Remainder Interest Works
| Stage | Who Has Possession | Who Has Future Interest |
|---|---|---|
| During Life Estate | Life tenant | Remainderman |
| After Life Tenant Dies | Remainderman | None (owns outright) |
Creating a Remainder Interest
Example deed language: "To A for life, then to B"
| Party | Interest | Rights |
|---|---|---|
| A (Life Tenant) | Life estate | Possess, use, profit during lifetime |
| B (Remainderman) | Remainder interest | Future ownership after A dies |
Types of Remainder Interests
| Type | Definition | Example |
|---|---|---|
| Vested Remainder | Certain to become possessory | "To A for life, then to B" |
| Contingent Remainder | Subject to condition | "To A for life, then to B if B graduates college" |
Remainderman's Rights
| Right | Description |
|---|---|
| Prevent Waste | Can sue life tenant for property damage |
| Sell Interest | Can transfer remainder interest |
| Mortgage Interest | Can use as loan collateral |
| Receive Property | Gets full ownership when life estate ends |
Life Tenant vs. Remainderman Conflicts
| Issue | Life Tenant Wants | Remainderman Wants |
|---|---|---|
| Maintenance | Minimal upkeep | Property preserved |
| Improvements | May not care | Value maintained |
| Timber/Minerals | Extract now | Preserve resources |
| Insurance | Minimal coverage | Full protection |
Remainder vs. Reversion
| Interest | Who Holds | Returns To |
|---|---|---|
| Remainder | Third party | Named remainderman |
| Reversion | Original grantor | Grantor or heirs |
Tax Implications
| Tax Type | Consideration |
|---|---|
| Gift Tax | Creating remainder may be taxable gift |
| Estate Tax | Remainder value excluded from life tenant's estate |
| Property Tax | Usually paid by life tenant |
| Income Tax | Step-up in basis possible at death |
Common Uses of Remainder Interests
| Use | Purpose |
|---|---|
| Estate Planning | Transfer wealth while retaining use |
| Medicaid Planning | Protect assets (with lookback rules) |
| Family Transfers | Parents retain home, children inherit |
Exam Alert
Remainder interest = FUTURE interest that becomes possessory when LIFE ESTATE ends. Remainderman receives full ownership after life tenant dies. Vested remainder is guaranteed; contingent remainder depends on condition being met.
Study This Term In
Related Terms
Life Estate
Real EstateA life estate is a freehold ownership interest in real property that lasts only for the lifetime of a designated person (the life tenant), after which the property passes to another party.
Fee Simple
Real EstateFee simple (also called fee simple absolute) is the most complete form of property ownership, granting the owner full bundle of rights including the right to use, sell, lease, or bequeath the property without restrictions, with ownership lasting indefinitely and passing to heirs.