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.

BREAKING DOWN '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. Named Beneficiary

    This term refers to any beneficiary named in a will, a trust, ...
  2. Primary Beneficiary

    A beneficiary in a will, trust or insurance policy that is first ...
  3. Absolute Beneficiary

    A designation of a beneficiary that can not be changed without ...
  4. Secondary Beneficiary

    A person or entity that inherits assets under a will, trust or ...
  5. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  6. Alternate Beneficiary

    In a will, an alternate beneficiary is usually named in case ...
Related Articles
  1. Retirement

    Who is a Beneficiary?

    A beneficiary is a person or entity that receives funds, assets, property or other benefits from a trust, will, or life insurance policy.
  2. Financial Advisor

    Why You Need to Find the Right IRA Beneficiary

    It definitely matters who you pick as your IRA beneficiary—and how you go about it. And in some cases, your best option may be to go with a trust.
  3. Retirement

    3 Deadlines For Retirement Plan Beneficiaries

    To take full advantage of new RMD regulations, beneficiaries need to take action before important deadlines.
  4. Retirement

    How To Set Up A Trust Fund In The U.K.

    A guide to the whys and wherefores of setting up this most versatile of estate-planning instruments in the United Kingdom.
  5. Retirement

    An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  6. 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.
  7. Financial Advisor

    Passing an IRA to a Trust: The Good and Bad

    Creating a trust is a common estate planning tactic, but naming a beneficiary to an IRA to a trust may have unintended consequences.
  8. Investing

    What is Discretionary Income?

    Discretionary income is an economic term referring to income left over after a person pays taxes and living expenses.
  9. Insights

    Explaining Consumer Discretionary

    Consumer discretionary is a term from economics that refers to the sector of the economy that produces goods and services that are nonessential.
  10. Financial Advisor

    How to Handle Client Beneficiary Designations

    Beneficiary designations are a critical financial planning step that can be easily overlooked. Here's how to ensure they are properly done.
RELATED FAQS
  1. What are the keys to setting up a trust fund?

    Setting up a trust to secure your assets for a beneficiary allows you to set the terms under which the beneficiaries are ... Read Answer >>
  2. How do I know how much of my income should be discretionary?

    Understand the difference between discretionary income and disposable income. Learn how much of a person's income should ... Read Answer >>
  3. What are the pros/cons of naming a trust as the beneficiary of a retirement account?

    This has been the topic of an ongoing debate in the financial community between estate planning attorneys and financial advisors. ... Read Answer >>
Hot Definitions
  1. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  2. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  3. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  4. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Four Percent Rule

    A rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. The four percent rule ...
Trading Center