In simplest terms, a remainder is a leftover interest in a property or property rights that someone may have after someone else takes ownership or after certain obligations have been met. It provides a continuing legal interest in the property for the holder of the remainder, and it is often used to preserve a property’s value.
Remainders are commonly deployed in the context of wills and trusts. A will might provide a remainder to a particular person following the death of the grantor, the person who created the will. Similarly, a trust might provide a remainder to the grantor’s heirs or beneficiaries once certain conditions have been met, such as when a minor reaches the age of majority or when a benefit is received.
Examples of Remainders in Business
Remainders are often used to structure business interests so that the parties involved have a continued ownership interest in the property or business. For example, an individual may own a business that he or she expects to pass on to his or her children, but wants to maintain some control over it while they are still alive and able to manage their affairs. The individual could create a trust which grants a remainder to the children after the death of the grantor.
Other common scenarios involve remainders in partnerships and the purchase of real estate. In a partnership, one partner may have a remainder interest in the partnership after the other partners have left or passed on. Likewise, when purchasing real estate, one co-owner may have a remainder interest in the land or property after the other has taken full ownership.
Wrapping Up
A remainder is a type of legal interest that is typically established following the death of a grantor in a will or trust. It gives the holder of the remainder a continuing legal interest in the property, often providing them with the ongoing benefits of ownership. Remainders are also used in business transactions to structure partnerships and real estate purchases so that the parties involved have continued access and control of the property or business.