What is a remainder interest?

A remainder interest is a legal concept in property law that refers to the future interest held by a person that will take effect after the termination of a preceding interest, such as a life estate. In this context, when a life tenant holds the property, their ownership lasts for their lifetime. Once the life tenant passes away, the remainder interest ensures that ownership of the property automatically transfers to a designated individual or entity. This creates a clear and unconditional path for property ownership after the life tenant’s interest expires.

This arrangement is fundamental in estate planning, providing both security for the future beneficiary and a definite endpoint for the life tenant's rights. Unlike a reversion interest, which would revert to the original grantor, a remainder interest is in favor of a third party who is specified in the deed or will. This clarifies the intended succession of ownership without ambiguity once the life tenant's rights come to an end.