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Executory Interest: A Deep Dive into Future Property Interests
Definition & Meaning
An executory interest is a type of future interest in property that is held by a third party. This interest either terminates another person's interest or begins after the natural end of a prior estate. Unlike a reversion, which goes back to the original owner, an executory interest is created in someone other than the person transferring the property. This legal concept is important in estate planning and property law.
Table of content
Legal Use & context
Executory interests are primarily used in property law, particularly in the context of wills, trusts, and real estate transactions. They play a crucial role in determining how property is transferred upon the occurrence of certain events. Understanding executory interests can help individuals navigate estate planning and ensure that their property is distributed according to their wishes.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Here are two examples of executory interests:
Example 1: A property owner transfers a property "to A for life, then to B." Here, B has a shifting executory interest that takes effect upon A's death.
Example 2: A person transfers property "to A for 100 years, then to the heirs of A." The heirs have a springing executory interest that activates after A's death.
State-by-state differences
Examples of state differences (not exhaustive):
State
Difference
California
Allows for more flexible terms in executory interests.
Texas
Has specific laws regarding the duration of executory interests.
New York
Follows the common law principles closely regarding executory interests.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Difference
Reversion
Future interest that returns to the grantor after the end of a prior estate.
Reversion goes back to the original owner, while executory interest transfers to a third party.
Remainder
Future interest that follows a life estate or term of years.
Remainders are vested or contingent, while executory interests can cut off prior interests.
Common misunderstandings
What to do if this term applies to you
If you are dealing with executory interests in your estate planning or property transactions, consider the following steps:
Review the language in your property transfer documents to understand any executory interests involved.
Consult with a legal professional if you have questions or concerns regarding your rights or obligations.
Explore US Legal Forms for templates that can help you draft or modify property transfer documents effectively.
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An executory interest transfers to a third party and can cut off another interest, while a remainder typically follows a life estate or term of years and returns to the grantor.
Yes, executory interests can be established in a will as part of the distribution of property.
No, executory interests can be either contingent or vested, depending on the language used in the transfer document.