In Jordan v. Parker, 2022 WL 17998227 (Tex. Dec. 30, 2022), the Texas Supreme Court held that a conveyance of a life estate actually conveyed a fee simple since the remainders were subject to alteration or even complete divestment by the life estate owner. In this case, a man devised his entire estate to his widow for life with remainders in their children, but the devise gave the widow complete power to transfer both the life estate property and to redirect ownership of the remainders. Part of the estate was a fractional ownership interest in a ranch.
Some years later, while the widow was still alive, a son who was a remainder owner conveyed his remainder interest to his daughters (the granddaughters of the widow and the testator). The widow never exercised her power to alter the remainders in her children during her lifetime, and the question was whether the widow continued to own that interest at her death or whether it was owned by the transferee of the remainder interest (the granddaughters).
As I have described the property interests, it appears that the widow had a life estate and the children (including the son) had vested remainders subject to divestment by actions of sthe widow. If that is the case, then the son owned a remainder and had complete authority to transfer his remainder to his daughter. Of course, that interest was subject to being destroyed by the owner of the life estate, but the life estate owner never did exercise that power during her lifetime. Under that reasoning, the daughters who were gifted the remainder now owned that interest in fee simple absolute. Even if one views the remainder as contingent rather than vested (because it might be read as a remainder conditional on the widow not destroying it or giving it to someone else before her death), it still is a remainder, and that is because it follows a life estate.
If there was an ambiguity about whether it was a life estate or a fee simple interest, then the traditional presumption against forfeitures would suggest interpreting the devise as a fee simple. But it is not clear why the conveyance is ambiguous given that it clearly creates a life estate and identifies named persons who will get the property after the life estate terminates, albeit with the possibility that those rights can be divested by subsequent events or actions.
The Texas Supreme Court analyzed the property interests in an entirely different manner. Because the remainders could be divested, they might never vest at all and thus were contingent. But that did not lead the court to interpret them as contingent remainders. Instead, because the remainders were subject to divestment, the court thought they were mere “expectancies” and not property rights at all. Under that reasoning, the words “for life” or “life estate” were read out of the will and they were interpreted instead as “fee simple absolute” with some possibility of being gifted in the future.
The court noted that the son’s gift to his daughters might not result in the transfer of any property since at that moment, he “did not presently own the disputed interest.” That is an odd conclusion since one can own a future interest whether it is vested or contingent; the interest may not become “possessory’ until the death of the life tenant, but that does not mean one does not currently own a recognized estate in land — a future interest. But since the court viewed the future interest as contingent, it interpreted it as not a property right at all. Under that reasoning, a grantor can created vested remainders but has no power to create contingent remainders (or vested remainders subject to divestment). And if that is the case, then the devise in this case transferred a fee simple interest rather than a life estate, despite the fact that the wording of the will stated that the widow was granted interests “for life.”
I do have to acknowledge that the property interests in this case were complicated and that the devise was mixed with other property interests owned by both the testator and his widow. But, in general, when a conveyance is “for life,” then it is not a fee simple but a life estate. And the fact that the remainder is subject to divestment by the life estate owner may make the life estate look like something between a life estate and a fee interest, that does not change the fact that the children were granted remainders and “remainders” follow life estates, not fee simple interests.
But the Texas Supreme Court’s ruling on property is to the contrary. Remainders that are subject to divestment because of actions taken by the life estate owner appear to no longer be remainders at all, even if that it was the intent of the grantor to create remainders. They are mere “expectancies” and not transferable by the “expectancy” holder. That rule also is contrary to the presumption that remainders are fully transferable unless subject to a valid and reasonable restraint on alienation — and in this case the will contained no restraints on alienation of the remainder interests at all.
It is somewhat hard to see the policy justification for the result other than a hostility to life estates in general, perhaps because life estates are not easily alienable. In this case, however, the devise gave the life estate holder powers of alienation and since she also had the power to alter the remainders, the restraint on alienation that we worry about with life estates does not seem to be present.
The upshot is that a conveyance or devise that creates a life estate may be interpreted by courts as a fee simple interest if other provisions of the conveyance lead the court to believe that there is some ambiguity that raises some doubt that a remainder was intended. It also raises the possibility that remainders may be ignored by courts if they are contingent rather than vested or if they are mixed with other property devised by the testator as part of the estate. I do find the result puzzling but it is now the law of Texas.