Illinois Real Estate Practice Exam

What type of interest is created when a fee simple holder grants a life estate and designates a remainder interest to another?

1. Life estate

2. Future interest

3. Joint tenancy

4. Leasehold estate

The correct answer is: Future interest

The correct answer is future interest. When a fee simple holder grants a life estate, they are giving another party the right to use and occupy the property for the duration of their life. Once that life estate ends—typically upon the death of the life tenant—the property does not revert back to the fee simple holder; instead, it goes to the individual designated as the remainder interest holder. This arrangement creates a future interest for the designated remainder holder since they have a right to the property in the future, even though they do not have any current rights to possess or use it while the life estate is in effect. In this context, while a life estate represents the present interest of the life tenant, it is the remainder interest that represents a future entitlement. Joint tenancy, on the other hand, involves multiple owners sharing interest and is unrelated to the life estate scenario. A leasehold estate signifies a different legal relationship typically involving rental arrangements, rather than the granting of life estates and subsequent future interests.