A remainder is a property law applied in the United States and the United Kingdom as well as in other countries that practice common law. A remainder is a right to own a property in future, also known as a future interest, which is freely awarded to an individual, giving him the right to receive the title to the property once a currently-existing interest in the property naturally terminates.
Remainders are commonly used in legal documents such as wills and are created by a decree or a deed stating how a property should be distributed among the beneficiaries. For example, a man may convey his home to his surviving wife for life and then to his two children and their heirs. In this case, the wife will have received the ownership of the home for the rest of her life (a life estate), while the children and their heirs will hold a remainder. The remainder can become possessory once the wife dies. However, the children cannot become the rightful owners of the property unless their mother dies.
Difference between a Contingent and Vested Remainder
There are two types of remainders, which are the vested remainder described above and the contingent remainder. The main difference between the two is that a vested remainder is typically issued to a person who has been identified and it usually has no prior conditions attached. However, a contingent remainder is one that has either been given to an individual who is yet to be identified, or the beneficiary has to fulfill some conditions before the remainder can be executed, or become active.
There are three types of vested remainders, which are:
– Indefeasibly vested: property rights cannot be withdrawn for life.
– Vested, subject to open: allows for other parties to join after partial divestment.
– Vested, subject to divestment: something could bear off a beneficiary’s right to the property.
Difference between Reversions and Remainders
A reversion is almost similar to a remainder with the main difference between the two being that in a reversion the conveyed property remains completely vested in the original grantor, while in a remainder, the transferred property usually becomes vested in the individual to whom it has been granted.
Disposing Of Vested Remainders
The beneficiaries of vested remainders can legally dispose of their right to the properties they have been granted given that such remainders usually convey absolute rights. Vested remainders allocate a present interest in a property to the beneficiary and he/she can sell their interest to another party, who has to wait until when the property shall pass on to the seller.
