The Vested Remainder

Hello again and thanks for reading this blog. In this article I will be discussing The Vested Remainder. In my next article I will discuss The Contingent Remainder, a first cousin of The Vested Remainder.

Up to this point I have written of the following estates: (1) The Fee Simple Absolute; (2) The Life Estate and its counterpart, The Reversion; (3) The Fee Simple Determinable and its counterpart, The Possibility of Reverter; and (4) The Fee Simple Upon Condition Subsequent and its counterpart, The Right of Re-entry. In estates 2 through 4 above, remember that The Reversion, The Possibility of Reverter, and The Right of Re-entry always went back, if at all, to the original grantor. These are all future interests reserved by the grantor. In our next estate, The Vested Remainder, we will see a future interest created in a third party grantee, not the original grantor.

My definition of The Vested Remainder: A vested remainder is a remainder interest, created in a third party grantee, that is certain to vest upon the expiration of the preceding Life Estate.

Let me use our traditional parties to demonstrate how this works: Bill Smith, as owner of Blackacre in Fee Simple Absolute (the mother ship) conveys a Life Estate to Shirley Thomas, remainder to Julie Phillips in fee simple absolute. Now, let's analyze this as every good examiner must do. As always, we are starting with the fee simple absolute held by Bill Smith. Bill Smith then carves a piece out of the fee simple absolute by conveying a Life Estate to Shirley Thomas. If we were to stop our analysis at this point, we would be left with a Life Estate held by Shirley Thomas and a Reversion held by Bill Smith. But, as you can see, there is additional language following the created interest of Shirley. That interest is classified as a vested remainder. Why is Julie's interest a vested remainder? Well, following our definition of a vested remainder, Julie's interest is certain to vest upon the termination of the preceding life estate.

Let me pose a question that some of you may have already considered: What would happen if Bill Smith conveyed a fee simple estate to Shirley Thomas, instead of a life estate? So our example would be re-written as follows: Bill Smith, as owner of Blackacre in fee simple absolute, conveys to Shirley Thomas in fee simple, remainder to Julie Phillips. The answer is that the interest of Julie Phillips would fail. Why? It is a rule of property law: There can never be a remainder interest following a grant in fee simple. It is essential to understand that a vested remainder can only follow the expiration of a properly created life estate.

Applying the calculus of estates: We have a conveyance from Bill Smith of a Life Estate to Shirley Thomas, remainder to Julie Phillips in fee simple absolute. Satisfying the calculus of estates is easy: upon the death of Shirley Thomas, Julie Phillips will hold in fee simple absolute and the calculus of estates is satisfied.

The Vested Remainder and its cousin, The Contingent Remainder, are often labeled as a 'remainderman' interest. It is the interest held by the third party grantee which remains after the termination of the preceding life estate.

In summary, a vested remainder is certain to vest upon the termination of the preceding life estate. You will see the importance of this when I discuss the contingent remainder in my next article. The contingent remainder is a remainder interest that is subject to a condition precedent. This condition precedent must be satisfied before it will vest in its holder.

Please click on next week for a discussion of the contingent remainder.

dave