Wednesday, June 27, 2012

Executory Interests

There are a variety of future interests you'll need to keep in mind when preparing for Property questions on the MBE. What sets executory interests apart from the others is that an executory interest is a future interest created in favor of a transferee, other than the grantor. Executory interests can be distinguished from reversions, rights of entry, and possibilities of reverter, in that in the latter three future interests, the grantor holds the future interest.

There are two types of executory interests with which you should be familiar: shifting interests, and springing interests.

A shifting interest cuts short a preceding estate in favor of another grantee. For example, X grants to Y for life, but if Y becomes bankrupt, then to Z. Let's examine the interests.

Y has a life estate, which is a present possessory estate. That life estate, however, is subject to an executory interest in Z. If Z's executory interest is to become possessory, it will necessarily do so by cutting off Y's life estate, once Y becomes bankrupt. It should be noted, that it's possible that Y will die prior to becoming bankrupt. In such a case, Z gets nothing, and the interest reverts back to X. Therefore X has a reversion.

A springing executory interest is an estate created to begin at some time in the future, which will cut short and terminate a reversion held by the grantor. For example, X conveys land to Y for life, and one year after Y's death, to Z.

Here, Y, as in the example above, has a life estate. At the natural termination of Y's life estate (when Y dies), the interest is going to revert back to the grantor, X. One year later, Z's executory interest will cut short the reversion of X, and that interest will spring forward to Z.

1 comment:

  1. Hi Sean,

    Great stuff as always. Can you clarify the differences between reversions, rights of entry, and possibilities of reverter?