Executory Interest

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An executory interest is a future interest in a transferee that must either divest the prior estate or spring out of the grantor to become possessory. Executory interests are non-vested interests and are subject to the Rules Against Perpetuities.

There are two types of executory interests: shifting and springing. A shifting executory interest divests some interests in another transferee prior to its natural expiration, thereby cutting short the prior estate. Many shifting executory interests will violate the Rules Against Perpetuities. A springing executory interest divests the transferor in the future and has a gap of time. If there is any time not accounted for, the estate reverts back to the original owner as a reversion

A fee simple subject to executory interest is a type of defeasible fee in which, on the happening of a stated event, automatically divests in favor of a third party that is not the transferor. 

[Last updated in December of 2021 by the Wex Definitions Team]