Definition
A reversionary interest is a future interest in property retained by a transferor — or the transferor's heirs — when the transferor conveys a lesser estate than the one held, and the property will return (revert) to the transferor upon the natural termination of the estate granted out. No separate conveyance is needed to create it; it arises automatically by operation of law from the fact that the grantor transferred less than the whole of the estate.
The classic illustration: an owner holds a fee simple and conveys a life estate to another. The grantor retains a reversionary interest — the right to possession once the life tenant dies. The grantor need do nothing further; the property returns by force of the original transaction's incompleteness.
Reversionary interest should be understood broadly enough to include:
1. Reversion (strict sense): The future interest remaining in a grantor who conveys a life estate or a term of years, leaving a gap that must eventually close when the lesser estate ends.
2. Possibility of reverter: The future interest retained by a grantor who conveys a fee simple determinable. Technically distinct from a reversion, but treated in many research contexts under the umbrella of reversionary interests because both involve the potential return of property to the original owner or heirs.
3. Right of re-entry (power of termination): The grantor's right, following breach of a condition subsequent, to elect to reclaim property conveyed on a fee simple subject to condition subsequent. Also sometimes grouped loosely under reversionary interests in older literature, though modern doctrine sharply distinguishes it.
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Common Language
Modern common usage (Wiktionary): "Reversion" in general English refers to a return to a former state or condition — a thing going back to what it was before.
Historical common usage (Webster's 1913): "Reversion" is defined as "the returning of an estate to the grantor or his heirs after the grant is over" and more generally as "a return towards some former state."
The common-language meaning is unusually close to the legal one here, but the gap that matters is this: ordinary usage treats reversion as a completed event — something that has already happened. Legal usage treats a reversionary interest as a present, vested property right existing now, even though possession will not be enjoyed until a future date. The reversionary interest is not a hope or expectancy; it is an asset that can be conveyed, taxed, and litigated over before the possessory estate ever ends.
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Common Confusion
Reversionary interest is frequently conflated with remainder interest. Both are future interests; both await the termination of a prior estate. The critical distinction is the relationship of the parties: a reversion returns to the grantor (or heirs); a remainder passes to a third party designated by the grantor. If O conveys to A for life, then to B and B's heirs, B holds a remainder, not a reversion. O retains nothing. If O conveys to A for life with no further designation, O retains a reversion.
Older authorities — and lay clients — also conflate reversionary interest with the possibility of reverter and the right of re-entry. These are distinct future interests with different characteristics: the possibility of reverter arises from a fee simple determinable and operates automatically; the right of re-entry arises from a fee simple subject to condition subsequent and requires affirmative election. Modern research materials generally keep them separate. Older sources may lump all three under "reversionary interests" without explanation.
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Why It Matters in Research
Reversionary interest sits at the intersection of property law, trust and estate planning, and tax law, which means a researcher encountering the term must immediately ask: in which context is it being used?
In property law sources, the term is doing doctrinal work — tracking the structure of estates and who holds what interest. In trust and estate planning sources, it is doing transactional work — identifying what the grantor retains and what that retention is worth. In tax sources (federal gift and estate tax, income tax), it is doing valuation work — a reversionary interest may be an includible asset in a gross estate or may trigger income recognition rules under the grantor trust provisions of the Internal Revenue Code.
Historical sources require particular care. Rapalje & Lawrence and similar late nineteenth-century dictionaries use "reversionary interest" as a broad, sometimes imprecise umbrella covering reversion, possibility of reverter, and occasionally right of re-entry without cleanly distinguishing among them. This was not careless drafting — pre-Restatement common law doctrine had not yet achieved the terminological precision that twentieth-century property scholarship imposed. A researcher reading an 1880s deed, will, or court opinion that speaks of "a reversionary interest" should not automatically assume the drafter meant the modern technical reversion rather than one of its cousins.
Modern corpus materials — particularly those organized around the Restatement (First) of Property (1936) and its successors — will draw hard lines among reversion, possibility of reverter, and power of termination. Researchers moving between pre- and post-Restatement sources must account for the terminological shift.
In trust instruments, the reversionary interest question frequently arises in connection with grantor trust status and whether the settlor's retained interest is large enough to cause trust income to be taxed to the settlor rather than the trust. This is a live tax issue with no counterpart in classical property doctrine.
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Historical Dictionary Support
Rapalje & Lawrence define reversionary interest as "the interest which a person has in the reversion of lands or other property" and note that it includes "a right to the future enjoyment of property, at present in the possession or occupation of another." The definition is brief but serviceable. It correctly conveys the essential feature — present right, future enjoyment — and it does not limit the concept to any single type of defeasible estate, which reflects the loose usage common in that era.
What Rapalje & Lawrence do not do is distinguish with precision between the reversion proper, the possibility of reverter, and the right of re-entry. For purposes of late nineteenth-century practice, the distinction may have mattered less; the instruments being drafted and litigated often used "reversionary interest" as a catch-all, and courts were not always required to classify the interest with modern exactness to resolve the dispute at hand.
The historical dictionaries are silent on the tax dimensions of reversionary interests, which makes sense: the modern federal income and transfer tax framework did not exist when these sources were compiled. Researchers using historical dictionary definitions to interpret modern tax materials should treat them as background orientation only.
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Jurisdictional Note
Most American jurisdictions have substantially adopted the Restatement's taxonomy distinguishing reversion, possibility of reverter, and power of termination, but the treatment of possibilities of reverter and rights of re-entry varies meaningfully by state. Some states have enacted statutes limiting how long these interests can remain outstanding; others have marketable title acts that can extinguish old reversionary-type interests if they are not re-recorded within statutory periods. A researcher focused on a specific state should check that jurisdiction's marketable title legislation before treating a historical reversionary interest as still operative.
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Encyclopedia Cross-Reference
estates_110: Classification of Future Interests — Remainders, Reversions, Executory Interests, and Powers of Termination (The Law Mind Trusts, Estates & Probate Encyclopedia) — primary reference for doctrinal classification and the modern taxonomy of future interests.
property_7: Future Interests — Executory Interests (Springing and Shifting) (The Law Mind Property Law Encyclopedia) — useful for understanding how executory interests interact with and differ from reversionary interests in the same instrument.
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