Confusion reigns as to the nature of a current permissible beneficiary’s equitable property rights under a fully discretionary trust

One court has characterized the equitable interest as vested. See Pfannenstiehl v Pfannenstiehl (I), 88 Mass. App. Ct. 121 (2015). Wrong. See Pfannenstiehl v. Pfannenstiehl (II), 475 Mass. 105 (2016). The property interest is contingent, the critical condition precedent being that trustee elects to make distributions of income and/or principal. On the other hand, one English commentator has characterized such an interest as “future property.” See Lewin ¶2-35. But this characterization also is wrong. A contingent equitable property interest is not an expectancy. It is a present property interest that is subject to at least one condition precedent, such as conception/birth, survivorship, or the exercise of trustee discretion. Thus, it would not be wrong, though ill-advised, to say that at the time of settlement contingent equitable property rights vested in the permissible beneficiaries. In other words, contingent interests were acquired at settlement, the acquisition itself not being subject to any conditions precedent." The vesting of interests under trusts is taken up generally in §8.2.1.3 of Loring and Rounds: A Trustee’s Handbook (2020), which section is reproduced in the Appendix below.