Which statement is true about automatic retention by the grantor of future interests?

• A. A reversion is automatically retained when a life estate or term is created, and a possibility of reverter is automatically retained with a fee simple determinable.
• B. Right of reentry is automatically retained in all transfers.
• C. Reversion only applies to fee simple determinable.
• D. Possibility of reverter applies to all future interests.

Answer: (A)

When a grantor conveys something less than the full ownership, the grantor automatically keeps a future interest unless the transfer creates a different arrangement. If the grantor gives a life estate or a term of years and nothing else is named to continue after that estate, the grantor holds a reversion automatically—the property returns to the grantor when the life estate ends or the term expires (absent a remainder to someone else).

For a fee simple determinable, the grantor automatically retains a different kind of future interest: the possibility of reverter. The property automatically comes back to the grantor if the specified condition breaks, without any extra conveyance needed.

Not every future-interest retention works the same way. The right of entry (power of termination) is not automatically retained in all transfers; it exists when the grantor reserves it in a transfer of a fee simple subject to a condition subsequent. And some statements are too narrow or too broad: reversion isn’t limited to fee simple determinable, it can occur with life estates or terms of years; and the possibility of reverter isn’t a feature of all future interests, only those tied to a determinable estate.

So the statement that a reversion is automatically retained with a life estate or term, and a possibility of reverter is automatically retained with a fee simple determinable, is the accurate description of automatic grantor retention.