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Understanding Remainder Interest: Your Guide to Future Property Rights
Definition & Meaning
A remainder interest is a legal term that refers to a person's future right to an asset or property. This interest becomes effective after a certain event occurs, such as the death of the current owner or the expiration of a trust. In simpler terms, if someone is designated to receive property after someone else no longer has a claim to it, that person holds a remainder interest.
Remainder interests are commonly established in estate planning, particularly in trusts. For example, a grantor may leave property to a family member for their lifetime, with the remainder interest going to another family member after the first person's death.
Table of content
Legal Use & context
Remainder interests are primarily used in estate law and trust law. They play a crucial role in how property is distributed after the death of an owner or the termination of a trust. Understanding remainder interests is essential for individuals involved in estate planning or managing trusts.
Users can manage their estate planning needs through legal templates available on platforms like US Legal Forms, which provide guidance on creating trusts and designating remainder interests.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A homeowner creates a trust that allows their spouse to live in the house for their lifetime. After the spouse's death, the property will pass to the homeowner's children. Here, the children hold a remainder interest in the property.
Example 2: A grantor establishes a charitable remainder trust, naming a charity as the remainderman. The charity will receive the remaining assets in the trust after the trust's term ends, typically upon the death of the income beneficiaries. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Remainder Interest Rules
California
Allows for both vested and contingent remainder interests in trusts.
New York
Requires clear language in wills to establish remainder interests.
Texas
Recognizes both types of remainder interests but has specific rules regarding life estates.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Life Estate
A property interest that lasts for the life of a specified individual.
A life estate ends upon the death of the individual, while a remainder interest continues to another party.
Contingent Remainder
A future interest that depends on a specific condition being met.
Contingent remainder interests may never become effective if the condition is not met.
Common misunderstandings
What to do if this term applies to you
If you believe you have a remainder interest in an asset, it's important to review the relevant legal documents, such as a will or trust agreement. Consider consulting a legal professional for personalized advice.
For those looking to create or manage a trust, US Legal Forms offers templates that can help you establish a remainder interest properly.
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