What Is a Remainderman?
A remainderman is a property law term that refers to the person who inherits or is entitled to inherit property upon the termination of the life estate of the former owner. A life estate refers to an arrangement in which a person’s ownership of property lasts for the duration of his or her life and then is transferred back to the original owner or to a third party. That person to whom ownership of the property is transferred is the remainderman. In a trust account, a remainderman would be the person who receives the principal remaining after all other required payments have been made, such as those to the beneficiary and expenses.
- The remainderman is the person who inherits property after a life estate.
- The remainderman receives the principal remaining in a trust account after the estate is distributed.
- A remainder interest is a future interest a person has in an asset.
How a Remainderman Works
The remainderman may exercise the right to hold and use the property in the trust only after the trust has been completely dissolved. For example, speaking to physical property, if the owner of the property bequeaths a piece of property to Person A for life and then to Person B upon Person A’s death, Person B is the rightful owner of a future interest, i.e., the remainder. This is to say that Person B’s interest becomes active only upon Person A’s death. The remainderman will inherit the property upon the death or termination of the former owner’s estate. The property may also be inherited when there is a specific notation of the same in the trust.
Remainderman Rights and Life Estates
A life estate deed, as opposed to a trust, is the vehicle by which the property owner, or the grantor, transfers legal ownership to another person, or the life tenant. In many cases, the grantor and the life tenant are the same person, but not always. Typically, the deed will state that the occupant of property is allowed to use it for the duration of their life. Almost all deeds creating a life estate will also name a remainderman—the person or persons who get the property when the life tenant dies.
A major benefit of a life estate deed is that it can be used to pass property upon the life tenant's death without it being part of the life tenant’s estate. As a result, the property does not have to go through probate. Any interest that the life tenant had in the property ended upon death and did not become a part of the life tenant’s estate. One complicating factor to life estate deeds, especially in real estate dealings, is that all parties need to be aware of the fact that both the life tenant and the remainderman have ownership interests, despite each having different rights of possession. The life tenant is the owner of the property until they die.
However, the remainderman also has an ownership interest in the property while the life tenant is alive. He or she has an interest in ensuring that the life tenant does not damage the property, diminish its value, encumber it, or attempt to sell it. The life tenant can sell the property with the remainderman’s consent and participation, but the remainderman may be entitled to a larger portion of the proceeds, depending on the life tenant’s age and life expectancy.