Two Types of Future Interests
When a property owner transfers less than full ownership, someone holds a future interest. Arizona law recognizes two distinct types. The difference comes down to where the property goes when the current interest ends.
Estates in expectancy are divided into: 1. Reversions. A reversion is the residue of an estate left in a grantor or his heirs, or in the heirs of a testator, commencing in possession upon the determination of a particular estate granted or devised. 2. Future estates. A future estate is an estate limited to commence in possession at a future time, either without the intervention of a precedent estate or upon the determination, by lapse of time or otherwise, of a precedent estate created at the same time.
A.R.S. § 33-204(A)A reversion stays with the original owner. If a parent grants a life estate to a friend but does not name anyone to receive the property after the friend passes away, the property reverts to the parent or the heirs of a testator. No separate grant is needed. The reversion exists automatically.
How Remainders Fit Into Estate Plans
A remainder is a future estate limited to commence after a preceding interest ends. The most common example is a life estate with a named remainder beneficiary. A parent deeds property to themselves for life, with the remainder going to their children. When the parent passes away, the children's interest becomes an estate in possession.
Remainders show up often in trust planning as well. A trust might give a surviving spouse income for life, with the remaining principal passing to children from a prior marriage. Understanding the difference between reversions and remainders helps families see exactly who receives what and when.