Definition
A remainder interest is a future property interest that vests automatically in a specific person after a present possessory interest ends. For example, property to Dad for life, remainder to his children.
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A remainder interest is what's left after someone else's interest ends. For example, if Grandpa conveys his house to Dad for Dad's lifetime, with remainder to his children, the children have a remainder interest—they get the house after Dad dies. Remainder interests are certain: they will occur if the remainderman outlives the life estate holder. This differs from contingent interests that might not occur. Remainder interests can be valuable (they might be worth half the property value if someone is young) or minimal (if the life estate holder is likely to live a long time). Remainder interests can be bought, sold, mortgaged, or inherited before they become possessory. Courts protect remainder interests—they prevent the life estate holder from damaging the property or depleting its value in ways that harm the remainderman. Remainder interests create complexity in property taxation and insurance—who pays property taxes? Who obtains insurance? Usually the life estate holder, but remainder interests must be considered.
Pro Tip
If you have a remainder interest, protect it. Ensure the life estate holder maintains property insurance and pays taxes.
Example
An 80-year-old grandmother transfers her house to her son for his life, remainder to her grandchildren. The grandchildren have a remainder interest—when the son dies, the house belongs to them regardless of what he leaves in his will.