Estate planning plays an essential role in protecting your designated heirs’ future interest in your property. The world of real estate is both detailed and complex when it comes to changing land ownership and often requires legal counsel who is intimately familiar with future interest. If you plan to leave your property to loved ones or a certain entity, it is important to work with a knowledgeable and reliable Houston estate planning attorney to ensure that this is handled in accordance with your specific wishes.

What Is Future Interest?

For estate planning purposes, a future interest is considered to be one that does not include a present right of possession. It is sometimes also referred to as a nonpossessory interest. For example, an individual who has a future interest in a piece of land does not currently have any rights or privileges in the land but will at some point in the future.

Three types of future interest in Texas include:

  1. Fee Simple Interest
  2. Life Estate Interest
  3. Remainder Interest

It is worth noting that future interest can be sold or transferred before it becomes presently active. In estate planning, this can mean that a person with future interest in land that passes away may bequeath that future interest to their designated heirs.

Fee Simple Interest

A fee simple ownership is perhaps the most common type of ownership in Texas and the nation.  A fee simple is basically what you would understand as outright ownership which may continue indefinitely. An owner of fee simple property has present and complete rights to possess, use, and transfer the property. The beauty of this type of ownership is that it offers flexibility in terms of what an individual can and cannot do on a property.

The purposes of establishing a fee simple ownership are usually to:

  • Provide property ownership
  • Leave property to designated heirs
  • Encumber property as loan collateral
  • Offer flexibility in actions such as selling and renting

Fee simple ownerships typically can result in a type of future interest called a fee simple interest. This generally means that a landowner engaging in this type of ownership can hand it down to an heir via a valid will. The individual who stands to inherit land from a fee simple ownership at a later date would be considered to have a future interest in the property.

Life Estate Interest

A life estate is also a type of future interest. A property designated as a life estate will only result in ownership once the present possessory estate ends. The time of possession is not infinite, but determined upon the life of another person. For example, your spouse may be granted a life-estate in your homestead for as long as they continue to live, at which point the property would then transfer in fee simple to your children.

Situations in which a life estate could end prematurely include:

  1. Executory interest. This means that a predetermined stated event could make a future interest in a property active. Generally, this can take the shape of the property being passed to the heir with the future interest.
  2. Non-Executory interest. In this instance, a property could pass to a third party but then returns to the grantor if a specific condition occurs. You may want this interest in place if you wish property to be used only for a specific purpose, and possession to transfer back to you or someone else if that specific use ends.

Remainder Interest

Another type of future interest in land is called a remainder. This allows an entity to possess and own land only if the fixed interest of the current property owner ends.

A remainder interest may result from a life estate. This can take the form of a landowner giving the property to Entity A for life, and upon the end of that life it would go to Entity B.

Another way a remainder interest can result is from the end of a predetermined term of years of ownership. In this case it could look like a landowner leaving a property to Entity A for 15 years, at which point it would then transfer to Entity B.

Rights of those with Future Interests

Even though beneficiaries of future interest may not have current rights to possess, use, or sell property, they may have rights to protect the value of the property. Future interest holders of property have the right to restrict the current possessor of the from “wasting” the property. This could mean keeping the possessor from making drastic changes or decisions, like tearing down structures or making risky investment decisions with stock portfolios.

Fighting over the Remainder

One common scenario our firm has seen is when a grantor leaves particular assets in a trust fund to be paid out to a particular individual for the lifetime of that beneficiary, with any remaining assets to be paid out to a charity or another individual after the beneficiary passes. Sometimes, the person or entity with a remainder interest may initiate a lawsuit to demand that funds paid out to the current beneficiary be limited so as not to “waste” the remainder that would be left to the remainder beneficiary. Unfortunately, lawsuits like this end up costing money, which is often taken out of the trust assets, reducing the amount of funds available to all beneficiaries, current and future.

To avoid this scenario, it is important to work with an experienced attorney who would know the techniques and strategies when creating your estate documents. It may be necessary to include “no contest” clauses or require future interest beneficiaries to sign waivers before they are named in the trust.

What to Look for In an Estate Planning Attorney

In general, the purpose of an estate planning attorney is to help individuals better understand the legal processes that can govern their financial affairs in the event of their incapacitation or death. For those specifically interested in an estate planning attorney that can assist with future interest, it is key for the legal counsel you select to:

  • Be licensed to practice law in the state
  • Have a thorough understanding of state law as it relates to real estate and inheritance
  • Possess years of experience in assisting clients with future interest
  • Stay in communication with clients periodically to account for any new changes
  • Be respected by both former clients and those within the legal and real estate industries

In addition to assisting with future interest for real estate, an attorney can also help with other valuable estate planning strategies such as:

  • Drafting a valid will
  • Formally designating your beneficiaries
  • Instituting a durable power of attorney
  • Establishing a medical power of attorney
  • Using expertise to help minimize or reduce estate taxes as appropriate
  • Avoiding probate court when possible
  • Represent you in court as needed

If you want to protect the future interests of heirs, or you are an heir with questions about a future interest, reach out to a reputable estate planning attorney today to find out more.