Future Interests

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A future interest is a non possessory interest (an interest that does not include a current right of possession) that can become possessory in the future. A person with a future interest in land does not have any present rights or privileges as far as the land is concerned. What he or she does have is an interest that will give him or her rights and privileges in the land at some point in the future.

We discussed Future Interests in the previous subchapters on the fee simple and the life estate. As an overview, let us refer to the following chart, which lists the names of the future interests involved in the various estates:

As we discussed in the previous chapters, there are reasons for the differences between the various names of the future interests. The important thing, however, is to remember the mechanics of how the various estates work, not the technical terms for their future interests.

It is important to note that a future interest, although it does not grant any present right of possession, can be transferred or even sold before it actually vests. In addition, should the holder of a future interest die before his or her rights vest, the future interest holder’s heirs would inherit the future interest. For example:

1. Ward conveys his house “to June for life.” Eddie then asks Ward if he could buy the house. Ward obviously can’t sell a present interest in the house because June owns the present interest until she dies. However, Ward can sell his reversion to Eddie. If he does so, June’s life estate is unaffected. However, Eddie now owns a remainder interest in the house so that he will get the house when June dies.
2. Ward conveys his house “to June for life.” Then Ward dies. Ward’s son, Wally inherits the remainder interest in the house. Thus, Wally will get the house when June dies. In addition, Wally can now sell his interest to Eddie, who will then have a remainder interest.

The Problem of Waste

The problem that any holder of a future interest has is that he or she is not in control of the property so long as his or her future interest has not vested. Therefore, the holder of a future interest can do nothing to stop the holder of the present interest from ruining the premises so that the future interest will be devalued. (This is most relevant to life estate situations, as a landlord can take care of this problem simply by inserting terms into the lease that prevent the tenant from damaging the premises.) Therefore, the law has developed certain rules so that the holder of a present interest owes certain duties to the holder of a future interest. These duties are:

    1. The holder of the present interest may not engage in “affirmative waste.” In other words, the present possessor may not do anything that will harm the value of the property.

However, there are some activities that are harmful to the property’s value that a possessor may engage in; these exceptions are:

• If the land was already being exploited in a certain manner before the present interest holder took over, he may continue that activity. This is known as the “prior use” exception.
• The possessor may make reasonable repairs and conduct regular maintenance operations on the property, even if this has the potential to decrease its value.
• If the land is only suitable for exploitation (e.g., a mine), the possessor may use the land for such purposes.

    2. The present interest holder must make reasonable efforts to protect the land and he or she must make reasonable repairs to the land.  

    3. The present interest holder may not make any significant changes to the nature of the property (even improvements) without the permission of the future interest holder.

See Kelly v. Neville, 136 Miss. 429 (1924).

Other Issues Regarding Future Interests

In the previous subchapters, when we discussed remainder interests (ie. the interest of a third party after a life estate or after a non-freehold estate), we assumed that the holder of the remainder interest was specifically named by the grantor. However, this need not be the case. In fact, there are two types of remainder interests: the “vested” remainder and the “contingent remainder.” The “vested” remainder occurs when it is clear who is getting the future interest, while the “contingent” remainder occurs when a condition needs to be fulfilled for a person to be able to claim his or her interests. For example:

1. Omar conveys his property “to Andrew for life, and then to Bart.” Andrew has a life estate and Bart has a vested remainder because it is clear that Bart is the person who owns the remainder interest.
2. Omar conveys his property “to Andrew for life, and then to the oldest of Andrew’s children who survive him.” Andrew has a life estate and one of Andrew’s children will have a remainder interest. However, since we don’t know who will actually receive the property when Andrew dies, the remainder is a “contingent” one.

There are several additional rules that have developed from feudal times forward that have developed to address various concerns about the way in which property is transferred and certain prevalent ideas about who ought to transfer property to whom. We will briefly discuss two examples of such rules. It is not particularly important to remember these rules as they are all but obsolete today. If you are confused by them, or simply can’t figure out what they are talking about, don’t worry; you are not the only ones and it won’t matter in the long run. However, they are being included for the sake of completeness.

The Rule in Shelley’s Case

The Rule in Shelley’s Case states that a remainder interest cannot be created in the heirs of the holder of the present interest. The theory behind it is that a person should be able to decide what his or her own heirs will inherit and should not have that decision dictated by a grantor of property. The rule has been abolished in most states. For example

Omar conveys a parcel “to Andrew for life, then to Andrew’s heirs.” This conveyance violates the rule because Andrew’s heirs have a remainder that follows Andrews’s life estate. The rule is based on the principal that Andrew, and not Omar, should decide what Andrew’s heirs get from him. Such a conveyance, under this rule, would give Andrew a fee simple absolute.

The Doctrine of Worthier Title

The Doctrine of Worthier Title dictates that a grantor cannot create a remainder interest in his own heirs. The idea behind this rule is that a grantor should rather keep a reversion for himself and then distribute the property to his heirs through the normal inheritance methods. The Doctrine of Worthier Title has been abolished in some states, but still exists as law in many other states. For example:

Omar conveys a parcel “to Andrew for life, then to my heirs.” This conveyance violates the Doctrine of Worthier Title because it creates a remainder interest in the grantor’s heirs. Instead, such a conveyance creates a life estate in Andrew and reversion in Omar. Note that if Omar dies before Andrew, Omar’s heirs are going to end up with the reversion anyway.

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