Tuesday, March 27, 2012

Future Interests: Executory Interests

The area of Future Interests is among the most difficult for students studying Property for the MBE. I intend to post often on this area between now and July, with each post touching upon a different aspect of Future Interests. Today's post is on Executory Interests.

Executory interests are future interests in third parties. It's important to note the two types of executory interests, and distinguish between them. The first is a shifting executory interest.

A shifting executory interest divests a transferee's preceding freehold estate. For example, let's say O conveys property "To A, but if B returns from New York within the next year, to B." Here, B has a shifting executory interest, and A has a fee simple subject to this shifting executory interest. As per our definition above, B divests A's freehold estate, if B returns from New York within the next year.

A springing executory interest, on the other hand, cuts short the grantor's own interest, in favor of the grantee. For example, O conveys "To A for life, and one year after A’s death to B and his heirs." O will have a one year interest, that will spring forward after A's death, and will go to B, the grantee.

A convenient method for recognizing shifting executory interests is that they generally arise when a grantor gives property to one person, provided that they use it a certain way. If the person fails to use it properly, the property transfers to a third party.

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