In the context of estate planning, what does a remainder interest signify?

A remainder interest signifies a future interest in a property that is set to transfer to a specified individual or group once a life estate ends. In estate planning, this structure is important because it defines how ownership is transitioned after the current owner, or life tenant, passes away or otherwise relinquishes their interest in the property.

For instance, if a property is placed in a life estate, the life tenant has the right to use the property during their lifetime. Upon their death, the remainder interest allows another party, often specified in the estate documents, to take full ownership of the property without the need for probate. This mechanism ensures a clear succession of ownership and can help to avoid disputes amongst heirs.

The understanding of remainder interest is critical for attorneys and estate planners, as it directly affects how properties are managed, transferred, and valued in the context of a decedent's estate.