What term describes a future interest that divests a preceding estate upon the occurrence of a stated event?

• A. Remainder
• B. Executory interest
• C. Reversion
• D. Possibility of reverter

Answer: (B)

A future interest that divests a preceding estate upon the occurrence of a stated event is an executory interest. This type of interest cuts into and ends the prior estate when the specified event happens, either transferring the interest to someone else (shifting executory interest) or to the grantor later (springing executory interest).

Remainder would take effect only after the preceding estate ends by natural termination, not upon an intermediate event. Reversion is a right retained by the grantor when conveying less than they own, coming into play when the prior estate ends. A possibility of reverter is a grantor-retained future interest that divests the grantee’s estate if a condition occurs, but it remains with the grantor rather than creating a third-party taker upon the event.