A future interest in property is a legal right to that property that will begin at some point in the future. If a person has a future interest, then he currently has no right to own or enjoy the property. Futures are created when an estate has an interest “trigger” condition or event that transfers ownership of a right in rem. One of the most common examples is seen in a landlord-tenant relationship. While a person rents a house, the landlord generally does not have the right to live in or enjoy the house. However, upon termination of the lease, the landlord will regain all rights to the property. In this case, the landlord has a future interest in the property. Future interest can generally be transferred by sale, gift, or will.
There are six basic types:
- Future Interest with the Possibility of Reversion – “James gives property to his son, Tommy, as long as he refrains from drinking alcohol.” This type occurs when an estate will revert to the grantor if a specific condition is violated. Here, James has reserved a future interest in the property that is only activated if Tommy drinks alcohol. If Tommy violates the condition, ownership is automatically transferred to James.
- Future Interests with Right of Reentry – “James gives property to Tommy, on the condition that Tommy refrains from drinking alcohol.” This interest rate is a little different from the possibility of reversal in that the grantor (James) has the option to claim ownership in case of violation of the condition. Here, if Tommy drinks alcohol, then Bob can choose to claim ownership or not, he will not automatically transfer to James if and when Tommy drinks.
- Future interest in a transferee – “James gives Tommy a piece of property when he graduates from college.” This option grants an interest in the future to the person to whom ownership is transferred. In this example, Tommy will receive the property in the future, when he graduates from college.
- Future interest with remainder acquired – “To James for life, the rest to Tommy.” An vested remainder is one that becomes a possessory upon termination of the previous life estate, but is not subject to any other conditions. Once the transferee’s interest has been acquired, the transferee is entitled to possession upon the grantor’s death. Also, in this example, Tommy is not required to outlive James. If Tommy is already dead at the time James dies, the interest will fall to Tommy’s estate.
- Future interest with contingent remainder – “To James for life, the rest to Tommy if he survives James.” A contingent remainder is one that becomes a possessory at the end of the previous life estate, Y is subject to an additional condition. The assignee will only receive interest after the death of the grantor if he has satisfied the additional requirement. In the example, Tommy will receive his interest in the property when James dies, but only if Tommy is still alive at the time of James’ death.
- A future interest with remainder is subject to opening if it belongs to a class of beneficiaries, where that class can be expanded. “James gives property to Tommy for life, then to Tommy’s children.” In this example, any children alive before Tommy’s death have a topic of interest to open because Tommy could potentially have more children.