Ownership of real property - Future interests

Learning Outcomes

This article explains future interests in real property, including:

• How to classify and diagram the main future interests—reversion, possibility of reverter, right of entry, remainder, and executory interest—in both simple and layered conveyances frequently tested on the MBE
• How to distinguish vested, contingent, and class remainders, including vested remainders subject to open and subject to divestment, and match each to common grant language such as conditions precedent and subsequent
• How to analyze class gifts, determine when the class opens and closes under the Rule of Convenience, and predict how additional or after-born members affect shares and RAP validity
• How to identify shifting and springing executory interests, connect them to defeasible fees, and determine when an interest properly labeled as an executory interest instead functions as a right of entry or possibility of reverter
• How to apply the common-law Rule Against Perpetuities using a structured When–What–Who approach to contingent remainders, executory interests, and class gifts, and how to articulate why an interest is valid or void
• How future interests are created, transferred, limited by statute, and terminated through merger, release, adverse possession, or RAP, and how these rules affect marketability of title and frequently tested exam scenarios
• How to approach multiple-choice questions efficiently by first identifying the present possessory estate, then each grantor and grantee future interest, and finally eliminating answer choices that misstate who holds which interest or ignore RAP problems

MBE Syllabus

For the MBE, you are required to understand the legal rules governing future interests in real property, with a focus on the following syllabus points:

• Define and distinguish the main types of future interests: reversion, possibility of reverter, right of entry, remainder, and executory interest
• Differentiate between vested and contingent remainders, including class gifts and subject-to-open remainders
• Recognize and apply the Rule Against Perpetuities (RAP) to future interests
• Identify how future interests are created, transferred, and terminated
• Analyze the effect of future interests on marketability and common exam scenarios

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which future interest can only be retained by a grantor?
   1. Contingent remainder
   2. Executory interest
   3. Possibility of reverter
   4. Shifting executory interest
2. O conveys "to A for life, then to B if B survives A." What interests are created?
   1. Vested remainder in B and reversion in O
   2. Contingent remainder in B and reversion in O
   3. Executory interest in B and reversion in O
   4. Vested remainder subject to open in B
3. Which of the following is subject to the Rule Against Perpetuities?
   1. Reversion
   2. Possibility of reverter
   3. Contingent remainder
   4. Right of entry
4. O conveys "to A for life, then to B, but if B marries before A dies, then to C." What interest does C hold?
   1. Vested remainder
   2. Contingent remainder
   3. Springing executory interest
   4. Shifting executory interest

Introduction

Future interests are nonpossessory rights to property that may become possessory in the future. They arise when a grantor conveys less than a full fee simple or attaches conditions to a conveyance. Understanding the types, creation, and limitations of future interests is essential for MBE success, as these concepts are frequently tested and often involve subtle distinctions.

At any given moment, someone must hold a present possessory estate (e.g., a life estate or fee simple) and others may hold future interests that will take when the present estate ends or upon some condition. On exam questions, your first task is always to identify who has the present estate; every other named party either has a future interest or no interest at all.

Key Term: Future Interest
A legal right to property ownership that will or may become possessory in the future, following the termination of a prior estate.

Future interests are classified by (1) who holds them (grantor or grantee) and (2) how they vest (automatically, on a condition precedent, or by divesting another interest).

Types of Future Interests

Future interests are classified by who holds them (grantor or grantee) and by the conditions attached to their vesting.

Future Interests Retained by the Grantor

Only the grantor (or her successors) can hold these interests.

1. Reversion

A reversion arises when a grantor conveys a lesser estate than she owns and does not specify who takes the remaining interest. The property automatically returns to the grantor or her heirs when the prior estate ends.

Key Term: Reversion
The future interest left in a grantor who conveys an estate of lesser duration than her own, which becomes possessory when the prior estate ends.

Common examples:

• "O to A for life." O has a reversion in fee simple
• "O to A for 10 years." O has a reversion in fee simple

Key points:

• A reversion is always vested (it will take whenever the prior estate naturally ends).
• Because it is vested, a reversion is not subject to the Rule Against Perpetuities.
• A reversion is fully alienable: it can be sold, devised by will, or pass by intestacy.
• The reversioner can sue a life tenant or other present possessor for waste that injures the future interest.

2. Possibility of Reverter

A possibility of reverter follows a fee simple determinable. If the stated condition occurs, the property automatically reverts to the grantor.

Key Term: Fee Simple Determinable
An estate that automatically ends and reverts to the grantor upon the occurrence of a specified event or condition, created by durational language such as "so long as," "while," or "until."

Key Term: Possibility of Reverter
The future interest retained by a grantor after conveying a fee simple determinable, allowing automatic reversion upon breach of a condition.

Example: "O to City so long as the land is used as a park." City has a fee simple determinable; O has a possibility of reverter. If the land ever stops being used as a park, City’s estate ends automatically and O (or O’s successors) has a fee simple.

Important exam details:

• The interest vests automatically when the condition occurs—no action by the grantor is required.
• A possibility of reverter is vested in interest and thus not subject to RAP, though some states limit its duration by statute or require periodic re-recording to keep title marketable.
• Adverse possession against the holder of a possibility of reverter generally begins to run when the determinable fee automatically ends (i.e., when the condition is broken and the grantor is entitled to possession).

3. Right of Entry (Power of Termination)

A right of entry (also called power of termination) follows a fee simple subject to condition subsequent. The grantor must take affirmative action to reclaim the property if the condition is breached.

Key Term: Fee Simple Subject to Condition Subsequent
An estate that may be cut short at the grantor’s election if a specified condition occurs, but does not end automatically.

Key Term: Right of Entry
The future interest retained by a grantor after conveying a fee simple subject to condition subsequent, allowing re-entry if a condition is breached.

Typical language:

• "To A, but if alcohol is ever sold on the premises, O may re-enter."
• "To A, on condition that the land is used for residential purposes; if not, O reserves the right to re-enter."

Key exam distinctions:

• No automatic forfeiture: A’s estate continues until O actually exercises the right of entry.
• A right of entry exists only in the grantor; if a similar power is given to a third party, that third party holds an executory interest, not a right of entry.
• Right of entry is vested and not subject to RAP, but many states restrict inter vivos transfer and require timely assertion of the right to avoid laches.

Courts dislike forfeitures. If language is ambiguous between a determinable fee and a fee simple subject to condition subsequent, courts often construe it as the latter so that forfeiture is optional, not automatic.

Future Interests Created in a Grantee

These interests are created in someone other than the grantor.

1. Remainders

A remainder is a future interest created in a transferee that is capable of becoming possessory upon the natural expiration of the prior estate (usually a life estate).

Key Term: Remainder
A future interest in a grantee that becomes possessory when a prior estate (typically a life estate or term of years) ends naturally, without cutting short that estate.

A remainder cannot follow a fee simple, because a fee simple does not have a “natural end.” Any future interest in a transferee that follows a fee simple is an executory interest.

Remainders are either vested or contingent.

Key Term: Vested Remainder
A remainder given to an identified person with no condition precedent, certain to become possessory upon termination of the prior estate.

Key Term: Contingent Remainder
A remainder given to an unascertained person or subject to a condition precedent, so it may never become possessory.

Within vested remainders, the MBE further distinguishes three types:

Key Term: Indefeasibly Vested Remainder
A vested remainder that is not subject to any condition subsequent and cannot be divested; it is certain to become possessory at the natural termination of the prior estate.

Key Term: Vested Remainder Subject to Divestment
A vested remainder given to an ascertained person but subject to a condition subsequent that may cut it short after it has vested.

Key Term: Vested Remainder Subject to Open
A vested remainder in a class of persons, at least one of whom is ascertained and has satisfied any condition precedent, where additional class members may still join and share the gift.

Key Term: Class Gift
A gift to a group of persons described by a common characteristic, such as "children" or "grandchildren," where the number of takers may increase or decrease over time.

Indefeasibly vested remainder

Example: "O to A for life, then to B." Assuming B is alive and identified when the grant is made, B has an indefeasibly vested remainder: B is known, and there is no condition precedent.

If B dies before A, B’s remainder passes to B’s devisees or heirs. A vested remainder is a present property right, not lost by the remainder holder’s death.

Vested remainder subject to divestment

This is a vested remainder that may be cut off by a later condition.

Worked Example 1.1

O conveys "to A for life, then to B if B survives A." What interests are created?

Answer:
A has a life estate. B has a contingent remainder (because B must survive A, a condition precedent). O has a reversion (if B does not survive A, the property reverts to O).

Now vary the grant.

"To A for life, then to B, but if B fails to survive A, then to C." Here B is ascertained and there is no condition precedent to B taking; instead, there is a later condition that may divest B.

• A: life estate
• B: vested remainder subject to divestment
• C: shifting executory interest (explained below)

This is the pattern used in the next worked example.

Worked Example 1.2

O conveys "to A for life, then to B, but if B marries before A dies, then to C." What interests do B and C have?

Answer:
A has a life estate. B has a vested remainder subject to divestment (because B is ascertained and will take unless divested by marrying before A dies). C has a shifting executory interest (because C will divest B if B marries before A dies).

Vested remainder subject to open (class gifts)

Key Term: Rule of Convenience
A common-law doctrine that closes a class gift when any class member is entitled to immediate possession, preventing later-born members from joining.

Example: "O to A for life, then to A’s children who reach age 21." At the time of the grant, A has three children: B (25), C (18), and D (15).

• B’s interest: vested remainder subject to open (B is an ascertained child who has already reached 21).
• C and D: each has a contingent remainder (they have not yet reached 21).
• The class will close at A’s death under the Rule of Convenience if the instrument does not specify another closing date; once any child of A is entitled to immediate possession, the class closes to later-born children.

RAP applies to vested remainders subject to open, because additional class members may vest too remotely.

Contingent remainders and alternative contingent remainders

A remainder is contingent if:

• It is given to an unascertained person (e.g., "A’s first grandchild"), or
• It is subject to a condition precedent (e.g., "to B if B graduates from law school").

Key Term: Alternative Contingent Remainders
Two or more contingent remainders that are created in the same instrument, are subject to the same condition precedent, and are structured so that only one can ultimately vest.

Example: "O to A for life, then to B if B survives A, but if B does not survive A, then to C." B and C hold alternative contingent remainders (they hinge on the same condition—B’s surviving A—and only one can take). O has a reversion if neither condition can be satisfied.

Historically, contingent remainders had to vest by the time the prior estate ended or they were destroyed. Modernly (and for MBE purposes unless told otherwise), the destructibility rule is abolished; an unvested contingent remainder usually becomes a springing executory interest if necessary.

2. Executory Interests

An executory interest is a future interest in a transferee that cuts short a prior estate or follows a gap in possession.

Key Term: Executory Interest
A future interest in a transferee that divests or cuts short a prior estate or follows a gap in possession.

Executory interests come in two types:

Key Term: Shifting Executory Interest
An executory interest that divests the interest of another transferee.

Key Term: Springing Executory Interest
An executory interest that divests the interest of the grantor or follows a gap after the grantor’s estate.

Executory interests always follow either:

• A defeasible fee (e.g., "to A, but if X occurs, to B"), or
• A gap after the grantor’s reversion ("to A for life, then one year after A’s death to B").

They never wait patiently for the natural end of the preceding estate; that is what remainders do.

Key Term: Fee Simple Subject to Executory Interest
A defeasible fee simple estate that is automatically divested in favor of a third party upon the occurrence of a specified condition.

Example of a shifting executory interest:

O conveys: "to my niece, but if she fails to pass the bar exam within a year of her law school graduation, to my nephew."

• Niece: fee simple subject to executory interest
• Nephew: shifting executory interest (he will cut off niece’s estate if the condition occurs)
• O: no remaining interest

This tracks a common MBE pattern.

Example of a springing executory interest:

O conveys: "to A, if and when A graduates from college."

• O: fee simple subject to a springing executory interest
• A: springing executory interest (A will divest O when the condition is met)

Worked Example 1.3

O conveys "to A for life, then to A's grandchildren who reach age 25." At the time of the grant, A has one child, B (age 30), and no grandchildren.

Answer:
A has a life estate. The purported gift to A’s grandchildren is a contingent remainder in a class, because no grandchild yet exists and each must reach 25 (a condition precedent). Under the common-law Rule Against Perpetuities, this gift is void. A could have another child after the grant. That child could later have a child (a grandchild of A) after all current lives in being have died. That grandchild might not reach 25 until more than 21 years after those lives. Because it is possible that the interest will vest too remotely, the entire class gift is invalid. O instead has a reversion following A’s life estate.

Worked Example 1.4

O conveys "to A so long as alcohol is never sold on the premises, and if alcohol is ever sold, then to B."

Answer:
A has a fee simple subject to an executory interest (A’s estate will end automatically if the condition occurs). B has a shifting executory interest (B will cut short A’s fee if alcohol is sold). O has no future interest. Because B’s interest might vest at any remote time in the future, it is subject to RAP and may be invalid under the common-law rule, leaving A with a fee simple determinable and O with a possibility of reverter.

Special Doctrines Affecting Remainders

Two traditional doctrines occasionally appear as background on the MBE.

Key Term: Doctrine of Worthier Title
A rule of construction under which a conveyance to the grantor's own "heirs" is presumed to create a reversion in the grantor rather than a remainder in the heirs.

Example: "O to A for life, then to O’s heirs." Most modern courts treat this as O retaining a reversion, not creating a remainder in the heirs. It is a presumption of intent, not an automatic rule in most jurisdictions.

Key Term: Rule in Shelley's Case
A (largely abolished) rule that converts a conveyance giving a life estate to a grantee with a remainder "to the grantee's heirs" into a single fee simple in the grantee by merger.

Example: "O to A for life, then to A’s heirs." At common law, this gave A a fee simple absolute. Many states have abolished the Rule and instead give A a life estate and A’s heirs a remainder (or construe "heirs" as words of limitation). Unless the question explicitly invokes this Rule, modern law typically applies.

The Rule Against Perpetuities (RAP)

The Rule Against Perpetuities limits the duration of certain future interests to prevent remote vesting. The classic rule is: "No interest is valid unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest."

Key Term: Rule Against Perpetuities
A legal rule invalidating certain future interests that might vest too remotely—beyond 21 years after the death of a relevant life in being.

RAP focuses on vesting, not on when possession begins. An interest can become possessory far in the future as long as we are certain, at the time of creation, that it will either vest or fail within the perpetuities period.

On the MBE, unless the question explicitly mentions a modern reform statute, assume the traditional common-law RAP applies.

Interests Subject to RAP

RAP applies to:

• Contingent remainders
• Executory interests (both shifting and springing)
• Vested remainders subject to open (class gifts), while the class is still open
• Certain options and rights of first refusal if they are assignable and not time-limited

RAP does not apply to:

• Reversions
• Possibilities of reverter
• Rights of entry
• Indefeasibly vested remainders
• Vested remainders subject to divestment (in a single person)
• Charity-to-charity gifts over (special exception)

The RAP “When–What–Who” Method

To analyze a RAP problem quickly, use three steps.

Key Term: Relevant Life
A person whose life is used to measure the perpetuities period because events affecting vesting are tied to that person's lifetime.

Key Term: Validating Life
A life in being at the creation of the interest who allows a court to determine with certainty, within that life plus 21 years, whether the interest will vest or fail.

1. When is the interest created?

   • Inter vivos conveyance: at the time of the grant.
   • Will: at the testator’s death, not when the will was executed.

2. What interests are potentially subject to RAP?

   • Identify all contingent remainders, executory interests, and class gifts (vested remainders subject to open). Ignore reversions and other clearly vested interests.

3. Who can serve as a validating life?

   • Look for persons mentioned in the grant whose lives affect vesting (life tenants, parents of takers, current class members).
   • If there is at least one life in being such that, within 21 years after that life’s death, we are certain the interest will either vest or fail, the interest is valid.
   • If no such life exists, the interest is void.

Worked Example 1.5

O conveys "to A for life, then to A’s first child to become a lawyer." At the time of the conveyance, A has one child, B (a teenager, not yet a lawyer).

Answer:
A has a life estate. The gift to "A’s first child to become a lawyer" is a contingent remainder: the taker is unascertained (we do not know which child will be first to become a lawyer) and subject to a condition precedent (becoming a lawyer).
RAP analysis: The relevant life is A. Within 21 years after A’s death, all of A’s children will either have become lawyers or not; no new children will be born. Thus, we will know within A’s life plus 21 years whether the interest vests or fails. A is a validating life, so the interest is valid under RAP.

Class Gifts and “All or Nothing”

For class gifts, RAP uses the “bad as to one, bad as to all” rule: if it is possible that the interest of any class member might vest too remotely, the entire class gift is void.

This is why grants such as "to A for life, then to A’s grandchildren who reach 25" often violate RAP when made inter vivos to a living ancestor who could have more children.

The Rule of Convenience can sometimes rescue a class gift by closing the class as soon as at least one member is entitled to possession, thereby preventing later-born members from joining and preventing remote vesting.

Executory Interests and Defeasible Fees

Executory interests following a defeasible fee are classic RAP traps. If an executory interest is not time-limited, it might vest at any remote time in the future.

Example: "O to School so long as the land is used for school purposes, then to A." The gift to A is a shifting executory interest that might vest centuries later; it violates RAP and is void. The effect is:

• School: fee simple determinable
• O: possibility of reverter

Charitable exception: if the gift is "to Charity A so long as used for charitable purposes, then to Charity B," the executory interest in Charity B is valid under the charity-to-charity exception to RAP.

Options and Rights of First Refusal

Most options in gross (not attached to a leasehold or other interest) and rights of first refusal that are assignable and not expressly time-limited can raise RAP issues. The MBE may test whether such an interest could be exercised more than 21 years after all relevant lives in being have died. If so, the option or right may be void.

Consequences of a RAP Violation

If a future interest violates RAP, it is treated as if it never existed. The rest of the conveyance is given effect if possible.

Example: If a contingent remainder is void under RAP, the grantor often retains a reversion. If an executory interest after a determinable fee is void, the grantor retains a possibility of reverter instead.

The exam rarely requires discussion of "infectious invalidity" (where striking the offending interest defeats the whole scheme); assume only the offending interest is removed unless the question states otherwise.

Exam Warning

The most common MBE error is failing to recognize when RAP applies. Always check class gifts, contingent remainders, and executory interests for possible RAP violations, even if the scenario seems unlikely.

Creation, Transfer, and Termination of Future Interests

Creation

• Express language only: Future interests in transferees (remainders and executory interests) must be created by express language in the instrument. They do not arise by operation of law.
• Grantor interests (reversions, possibility of reverter, right of entry) arise either by express reservation or automatically when the grantor has not conveyed the entire estate.

Examples of creation:

• "To A for life, then to B": creates a life estate in A and a remainder in B, plus any necessary reversion in O.
• "To A so long as no liquor is sold": creates a fee simple determinable in A and a possibility of reverter in O.

Transfer

Most future interests are transferable both inter vivos and at death:

• Remainders and executory interests are freely alienable, devisable, and descendible.
• Reversions are fully transferable.
• Possibilities of reverter and rights of entry are inheritable, and in many states are devisable; some jurisdictions still restrict inter vivos transfer of rights of entry.

On the MBE, unless the fact pattern says otherwise, you may assume future interests are transferable.

Future interests also affect marketable title. A buyer takes subject to outstanding future interests, and title is often deemed unmarketable where:

• Unborn or unascertained persons hold future interests (e.g., "to A for life, then to A’s eldest surviving daughter").
• There are outstanding contingent remainders or open class gifts.

Termination and Destruction

Future interests may cease to exist in several ways:

• Merger: If the same person later acquires both a present estate and the next vested future interest in the same property, those interests may merge into a larger estate, extinguishing intervening contingent remainders. Example: if O conveys "to A for life, then to B," and A later conveys her life estate to B, B now has a fee simple.
• Release: A future interest holder can execute a valid release to the present estate holder, eliminating the future interest.
• Failure to vest under RAP: If an interest violates RAP, it is void from the outset.
• Statutes: Some states limit the duration of rights of entry and possibilities of reverter (e.g., 30 years) or require periodic re-recording of such interests (marketable title acts). If the statutory requirements are not met, the interest may become unenforceable.
• Adverse possession: The statute of limitations for adverse possession generally does not run against the holder of a future interest until that interest becomes possessory. An exception is the holder of a possibility of reverter when the determinable fee automatically ends; the limitations period then begins to run against the grantor’s right to reclaim possession.

Revision Tip

On the MBE, always classify the prior estate, then the future interest, and finally check for RAP issues. Use diagrams if needed, and distinguish carefully between remainders (which wait for a natural end) and executory interests (which cut short another estate or follow a gap).

Key Point Checklist

This article has covered the following key knowledge points:

• Future interests are nonpossessory rights to property that may become possessory in the future and must be analyzed alongside the present possessory estate.
• Grantors may retain reversions, possibilities of reverter, or rights of entry; these are vested interests and are not subject to RAP.
• Grantees may hold remainders (vested or contingent) or executory interests (shifting or springing); remainders follow life estates or terms of years, and executory interests follow fees or gaps.
• Vested remainders are subdivided into indefeasibly vested, vested subject to divestment, and vested subject to open; contingent remainders may include alternative contingent remainders.
• The Rule Against Perpetuities applies to contingent remainders, executory interests, and class gifts (vested remainders subject to open), but not to reversionary interests or indefeasibly vested remainders.
• Class gifts must satisfy RAP under the “all or nothing” rule; the Rule of Convenience may close the class to avoid remote vesting.
• Executory interests following defeasible fees are frequent RAP traps; if the executory interest is void, the grantor usually retains a possibility of reverter or right of entry.
• Most future interests are transferable during life and at death, but some states restrict inter vivos transfer of rights of entry and possibilities of reverter.
• Future interests held by unborn or unascertained persons can render title unmarketable and limit the ability to convey a fee simple absolute.
• Always analyze future interests with a structured method: identify the present estate, classify each future interest, then apply RAP using the When–What–Who approach.

Key Terms and Concepts

• Future Interest
• Reversion
• Possibility of Reverter
• Right of Entry
• Fee Simple Determinable
• Fee Simple Subject to Condition Subsequent
• Fee Simple Subject to Executory Interest
• Remainder
• Vested Remainder
• Indefeasibly Vested Remainder
• Vested Remainder Subject to Divestment
• Vested Remainder Subject to Open
• Class Gift
• Contingent Remainder
• Alternative Contingent Remainders
• Executory Interest
• Shifting Executory Interest
• Springing Executory Interest
• Doctrine of Worthier Title
• Rule in Shelley's Case
• Rule Against Perpetuities
• Relevant Life
• Validating Life
• Rule of Convenience