Beneficiary Of Trust

Beneficiary Of Trust
See also

In the trust law, beneficiary of trust is an individual (e.g. a spous or minor), a group of individuals (e.g. relatives) or an organization (e.g. corporation, governmental institution, charity) profiting from a trust. A trust may concern more than one beneficiary[1].

The creation and operation of a trust involves the following three parties[2]:

  • grantor (creator/ settlor), an individual transferring a property which is concerned the body or corpus of a trust. Grantor names the beneficiaries of the trust.
  • trustee, a person who administers a trust in accordance with pertinent local regulations and the terms and conditions of the trust. A trustee coordinates distribution of benefits to the beneficiary of the trust..
  • beneficiary, a receiver of the income or property from the trust.

Basic Rights of Beneficiaries

A beneficiary is entitled to[3][4]:

  • a copy of a trust
  • challenge the terms of a trust within 120 days from when one received a notice about the trust
  • receive a fiduciary accounting every year or upon a request
  • sue the trustee for breach of trust or malpractice
  • obtain the sufficient information about the trust and its management
  • use profits from the trust to fulfil purposes named in the trust (e.g. education, funeral expenses), if any. Otherwise, the beneficiary is free to utilize profits to their liking. Once a particular purpose is achieved, the trust terminates. Sometimes, lifelong trusts are established as well.

Legal Title vs. Beneficial Title

Trusts are a special type of property holding. A holder of the legal title to a property under trust, a trustee does not hold the absolute ownership. The trustee is obliged to govern the property for the benefit of a beneficiary. Thus, it is the beneficiary that holds the equitable (beneficial) title to trust property[5][6].

Sometimes, a sole beneficiary may become a co-trustee. However, when a sole beneficiary turns out to be a sole trustee and therefore holds both the legal and equitable title, the trust fails. This is due to the fact that these two titles give the absolute ownership[7].

Footnotes

  1. Goldstone H., Hughes J., Whitaker K. (2015)., pp. 30
  2. Goldstone H., Hughes J., Whitaker K. (2015)., pp. 30
  3. Webb Ch., Akkouh T. (2007)., pp. 20 - 27
  4. Goldstone H., Hughes J., Whitaker K. (2015)., pp. 218 - 220
  5. Webb Ch., Akkouh T. (2007)., pp. 16 & 17
  6. Brown G., Myers S. (2008)., pp. 215
  7. Webb Ch., Akkouh T. (2007)., pp. 2 - 4

References

Author: Piotr Łabuz