Discretionary Beneficiary

AAA

DEFINITION of 'Discretionary Beneficiary'

Discretionary beneficiaries are those named in a trust or similar document to whom distributions may be made. While discretionary beneficiaries may apply for distributions, it is up to the trustees to determine whether the payment will be made. In the United States, a discretionary beneficiary has no legal proprietary interest in the trust.

INVESTOPEDIA EXPLAINS 'Discretionary Beneficiary'

There is usually a reason for a person to be named a discretionary beneficiary. For example, they may be young or have bad financial habits, or they have many unpaid creditors. While the trustees still have fiduciary responsibilities to a discretionary beneficiary, it is difficult to enforce this responsibility unless there is a specific letter of intent by the grantor of the trust.

RELATED TERMS
  1. Donee Beneficiary

    A person who is considered a non-party in a contract but still ...
  2. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  3. Trustee

    A person or firm that holds or administers property or assets ...
  4. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  5. Trustor

    An individual or organization that gifts funds or assets to others ...
  6. Laughing Heir

    A distant relative who has inheritance rights despite not having ...
Related Articles
  1. Retirement

    Pick The Perfect Trust

    Trusts are an estate plan's anchor, but the terminology can be confusing. We cut through the clutter.
  2. Retirement

    Designating A Trust As Retirement Beneficiary

    Designating a trust as your IRA beneficiary can be beneficial, but it requires proper planning to avoid problems.
  3. Personal Finance

    Special Trusts For Special Needs

    If you or someone you love has a disability, these trusts can help ease the cost of care.
  4. Home & Auto

    Can You Trust Your Trustee?

    Ignorance and incompetence can cost you money. Make sure your trustee is up to the task.
  5. Insurance

    Encouraging Good Habits With An Incentive Trust

    Money can be a powerful motivator - why not use it to teach your heirs positive lessons?
  6. Retirement

    Establishing A Revocable Living Trust

    This arrangement allows you to have more control over your estate - both before and after your death.
  7. Retirement

    Mistakes In Designating A Retirement Beneficiary

    Make sure your beneficiary designations not only reflect your intentions but also meet the requirements to be effective.
  8. Professionals

    Tips for Spreading the Wealth to Relatives

    There are many ways that your clients can move money or other assets to relatives in order to reduce their tax bills. Here's a primer on best practices.
  9. Professionals

    Tips for Handling Client Inheritance

    When clients leave or receive an inheritance, be prepared to deal with much more than mere paperwork or financial transactions.
  10. Professionals

    Advice on Dealing with Unequal Inheritances

    When it comes to inheritances, the concept of equal versus equitable can be hard to navigate, even when all parties are reasonable.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center