National Real Estate Practice Exam

What term describes the ownership interest that takes effect after the termination of a life estate?

1. Inchoate interest

2. Remainder interest

3. Reversionary interest

4. Leased interest

The correct answer is: Remainder interest

The term that describes the ownership interest that takes effect after the termination of a life estate is known as a remainder interest. In real estate, a life estate is a type of ownership that lasts for the duration of an individual's life. When that individual passes away or the life estate is otherwise terminated, the property does not revert back to the original grantor automatically. Instead, if the property is designated to pass to someone else after the life estate ends, this individual holds what is termed a remainder interest. In this context, a remainder interest allows the new owner to take possession of the property once the life estate concludes. This is different from a reversionary interest, which is held by the original property owner (or their estate) and signifies that the property will revert back to them after the life estate ends, rather than passing to a third party. Other terms provided in the options refer to different concepts in property law. An inchoate interest typically refers to a future interest that is not yet fully realized or vested, while a leased interest pertains to an individual's right to use property that is under a lease agreement, which does not relate to life estates or their termination. Hence, remainder interest accurately defines the situation where ownership transfer occurs after a life estate