What does a remainder interest refer to in real estate terms?

A remainder interest in real estate refers to a future interest that will take effect once a prior estate, often a life estate, terminates. This means that the holder of the remainder interest will have the right to take possession of the property after the current owner (the life tenant) no longer has an interest in it, typically due to their death.

For example, if a property is granted to a person for their lifetime, upon their passing, the property is conveyed to another party who holds the remainder interest. This arrangement creates a clear distinction in ownership rights over time, where one party holds a present right to use the property and another holds a future right.

Understanding remainder interests is critical in real estate as it affects how property can be transferred and who has rights at different times. The other choices do not accurately describe remainder interest: one suggests state ownership, another suggests complete ownership which does not reflect the future nature of a remainder, and the last option discusses initial ownership without referencing the specific estate's termination that defines a remainder interest.