Who is a Trust Beneficiary?

Definition of a Trust Beneficiary

A trust beneficiary is a person or entity that is designated to receive the benefits of a trust, meaning they are entitled to receive income, assets, or other advantages as outlined in the trust document. 

Here’s a more detailed explanation:
  • Who they are:

    The beneficiary is the individual or entity (like a charity) who is intended to benefit from the trust’s assets and the trust’s management. 

  • What they receive:

    The benefits can include income generated by the trust assets, the assets themselves, or other advantages as stipulated by the terms of the trust. 

  • Role in a trust:

    The trustee manages the trust assets for the benefit of the beneficiaries, following the instructions outlined in the trust document. 

  • Types of beneficiaries:
    • Fixed beneficiaries: Have a simple fixed entitlement to income and capital. 
    • Discretionary beneficiaries: The trustees must make decisions as to their respective entitlements. 
  • Beneficiary rights:

    Beneficiaries can monitor the trustee and the activity in the trust, and can take legal action if they aren’t adequately kept up to date or if they suspect the trustee has breached their fiduciary duty. 

  • Beneficiary and ownership:

    Beneficiaries usually need to have ownership (either legal or beneficial) over the assets they benefit from. 

  • Beneficiary and taxes:
    Trust beneficiaries must pay taxes on income and other distributions from a trust, but not on principal from the trust’s assets.