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Vested interest
Practical Law UK Glossary 9-383-4027 (Approx. 5 pages)
Glossary
Vested interest
A beneficiary of a trust has a vested interest if he does not have to meet any conditions for his interest to take effect. The interest may be:
- Vested in possession, if it is a "present right to present enjoyment", such as an immediate right to income.
- Vested in interest, if it is a "present right to future enjoyment", such as a right to capital which is ready to take effect when another beneficiary's interest ends.
For example, Brian creates a trust to pay income to his daughter, Beatrice, for life and then to hold the capital for Beatrice's children on her death. Beatrice's interest is vested in possession, and her children's interests are vested in interest. If a child dies before Beatrice, his share of capital passes to his estate.
If a beneficiary has to meet a condition (such as surviving to a certain age, or surviving another beneficiary) he has a contingent interest, not a vested interest. When he meets the condition, his interest vests.
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