Basic Estates and Future Interests

Adapted from Jeremy Sheff, "Estates and Future Interests" in Stephen Clowney, James Grimmelmann, Michael Grynberg, Jeremy Sheff, and Rebecca Tushnet, eds., Open Source Property: A Free Casebook, https://opensourceproperty.org (2015).

We will begin by examining two possessory estates—the fee simple absolute and the life estate—and two future interests … —the reversion and the remainder.

The Fee Simple Absolute #

The fee simple absolute is the most complete interest in land that the law will recognize. When we say that “O owns Greenacre without any further qualification, what we actually mean is that O owns a presently possessory fee simple absolute in Greenacre. The key distinguishing characteristic of the fee simple absolute is that it has no inherent end—it is an estate of indefinite duration. It is descendible, devisable, and alienable inter vivos; so it can be transferred to a new owner, but it cannot be destroyed. At most, it can be carved up into lesser estates and interests for a while, and we will spend most of the rest of this chapter understanding how that happens.

At common law, as previously noted, the fee simple absolute was created by the formula: “to A and his heirs.” That formula still works, but in modern usage it is sufficient to simply say “to A,” and the use of such language in a conveyance from the owner of a fee simple absolute will be presumed to create a fee simple absolute in A.

The Life Estate #

The life estate is just what it sounds like: an estate that confers a right to possession for the life of its owner. The owner of a life estate is referred to as a life tenant. The life estate terminates by operation of law upon the owner’s death (i.e., it ceases to exist). It is created by the formula: “to A for life.” Because it must by definition end—we all have to die sometime—any land held by a life tenant must also be subject to a future interest in some other person.

[…]

The Reversion #

[…] Consider what happens when A, owning a life estate in Greenacre, dies. A’s life estate terminates by operation of law; it simply ceases to exist and disappears. Who “owns” Greenacre now? It seems obvious that somebody must have a right to possession of the land, but it seems equally obvious that whoever that somebody is, they had no right to possession before A died. Whoever they are, during the term of A’s life estate they must have held an interest that would entitle them to take possession at some point in the future (that is, a future interest).

There are two candidates for such an interest. We will begin with the most basic: the reversion. Suppose that O, owning a fee simple absolute in Greenacre, conveys Greenacre “to A for life,” and says nothing more? What is the legal effect of this grant?

Based on the formula we just learned, it should be clear that A receives a life estate in Greenacre. But what other effects does the grant have on the legal rights of the parties? Think about the interest O held prior to the conveyance: the fee simple absolute. Remember that a fee simple absolute is an interest of infinite duration—it never ends. So when O starts with a possessory interest of infinite duration, and then gives away a life estate—whose duration is limited by a human lifespan—to A, something was left over. Specifically, O never gave away the right to possession of Greenacre from the day of A’s death to the end of time. Whether meaning to or not, O gave away less of an interest in Greenacre than what he owned, meaning he still holds some interest. We call this type of interest—the residual interest left over when a grantor gives away less than they have—a retained interest.

This retained interest can’t entitle O to possession during A’s life—A has the exclusive right to possession as the life tenant. So O’s interest must be a future interest during the term of A’s life estate: an interest that will entitle O to possession after the natural termination of the life estate. As we discussed in the example of the lease, we call this kind of future interest a reversion. It is a retained interest in the grantor—created when a grantor conveys less than his entire interest—that will become possessory by operation of law upon the natural termination of the preceding estate. Colloquially, we say that Greenacre “reverts” to O. In some opinions, you will see the holder of a reversion referred to as a “reversioner.”

A reversion can of course also be created explicitly, for example, if O conveys Greenacre “to A for life, then to O.” In this case, O has explicitly created a life estate in A followed by a reversion in O.

The Remainder #

A remainder is a type of future interest created in someone other than the grantor. The distinguishing characteristic of the remainder is that—like a reversion—it cannot cut short or divest any possessory estate. (We will later encounter other future interests that can.) A remainder simply “remains,” sitting around and waiting for the natural termination of the preceding possessory estate (be it a life estate or a lease), at which point the remainder will become possessory by operation of law. Suppose that O, owning a fee simple absolute in Greenacre, conveys Greenacre “to A for life, and then to B.” Again, A would have a life estate, but now O has also affirmatively created a future interest in B. Because the future interest is created in someone other than the grantor, it isn’t a reversion. And because it cannot cut short A’s life estate (note the “and then” language), it must therefore be a remainder. Due to the persistence of dated gendered terms in legal discourse, you will often see the holder of a remainder referred to as a “remainderman,” even today, regardless of that person’s gender.