BENEFICIARY OF TRUST Meaning and
Definition
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A beneficiary of trust is an individual or entity who benefits from a trust agreement. In a trust arrangement, the settlor (also known as the trustor or grantor) transfers assets or property to a trustee, who then holds and manages these assets on behalf of the beneficiaries. The beneficiary of trust refers to the recipient or recipients designated to receive the benefits or proceeds from the trust.
A beneficiary of trust can be any person, such as a family member, friend, or organization, who is named in the trust document as being entitled to receive distributions or income generated by the trust assets. The distribution can be in the form of cash, investments, or any other assets held in the trust. The rights and entitlements of the beneficiary are typically outlined within the trust agreement.
The role of the beneficiary of trust is passive, meaning they do not have direct control or ownership of the trust assets. Instead, their interests are protected by the trustee, who has a fiduciary duty to act in the best interest of the beneficiaries. This duty includes managing the trust assets diligently and prudently, as well as distributing income or principal to the beneficiaries according to the terms of the trust.
The beneficiary of trust is responsible for paying any taxes due on distributions received from the trust, although the trustee might assist in fulfilling these obligations. Additionally, beneficiaries may have the ability to challenge the actions of the trustee if they believe that the trustee is not fulfilling their fiduciary duty.
