Reversionary Interest Law and Legal Definition

Reversionary interest is the interest that a person has in a property when a preceding estate ceases to exist. It means any interest the enjoyment of which is postponed. A reversionary interest can be either a vested interest or contingent interest. Under reversionary interest, a transferee's right to own and occupy land is subjected to a condition that is placed by the property owner. A reversionary interest cannot be enjoyed if the condition is violated and the property upon which the reversionary interest is given will return to the original owner.

Reversionary interest in the context of real property or wills and estates means a reservation created in a real property conveyance that the property will revert back to the original owner upon the happening of a certain event. The term reversionary interest is used with reference to other areas of law also.

According to 26 USCS § 2037 (b) the term "reversionary interest" includes a possibility that property transferred by the decedent:

(1) may return to him or his estate, or

(2) may be subject to a power of disposition by him,

but such term does not include a possibility that the income alone from such property may return to him or become subject to a power of disposition by him. The value of a reversionary interest immediately before the death of the decedent shall be determined (without regard to the fact of the decedent's death) by usual methods of valuation, including the use of tables of mortality and actuarial principles, under regulations prescribed by the Secretary.