shifting executory interest

Shifting executory interest is a future interest in a third-party transferee that divests or cuts short another transferee’s possessory or future interest. It transfers part or all of the rights in property from a previous transferee to the third-party transferee prior to their natural expiration. In other words, these rights need to be vested. Consider the following example:

O to A but to S if S should be released from prison.

Here, O gives A a fee simple subject to executory interest, which is a vested possessory interest in the property. S has a shifting executory interest because if S is released from prison, it will divest A by cutting short their fee simple subject to executory interest.

If the previous transferee’s interests are not vested, then there could be a situation of contingent remainder. Consider the following two examples.

Example 1: O to A for life, then to B, but if B does not have children, then to C.
Example 2: O to A for life, then to B if B has children, otherwise to C.

In both examples, C and their heirs will eventually obtain the property rights if B has no children. However, C has different property rights in the two examples.

In the first example, B has a vested future interest. Whether B has children or not is a condition subsequent. Therefore, if B does not have children, C would obtain the property rights by divesting B’s already vested future interest. In this case, C has a shifting executory interest.

In the second example, B does not have any vested interest yet. The property rights after A’s death will go to B if B has children, or it would go to C if B does not. C is not cutting short or divesting any of B’s vested property interests as B’s rights are purely contingent. Therefore, both B and C have an alternative contingent remainder.