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Remainder Interest

Property & Real Estate

A future property interest that becomes full ownership after a life estate or fixed-term estate ends.

A remainder interest is a future ownership right in property that takes effect after a prior estate (such as a life estate) ends. The person who holds the remainder interest, called the remainder holder, receives full ownership when the life tenant dies or the fixed term expires.

How a Remainder Interest Works

When a property owner creates a life estate, they typically name two parties. The life tenant uses the property during their lifetime. The remainder holder waits. When the life tenant passes away, ownership transfers to the remainder holder automatically. No probate is needed.

Protections for Remainder Holders

Under Arizona law (A.R.S. 33-228), a properly created remainder interest cannot be destroyed by the life tenant's actions. The life tenant cannot sell the property, give it away, or mortgage it without the remainder holder's consent. This protection ensures the remainder holder will receive the property as intended.

Remainder Interest in Estate Planning

Remainder interests are most commonly seen in life estate arrangements, but they also appear in trusts. Under Arizona law, future interests are "descendable, devisable and alienable." That means a remainder interest can be inherited, included in a will, or even sold before it takes effect. It is a real property right from the moment it is created, not just a promise.

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