What Is A Beneficiary Of A Living Trust?

Attorney Image By: James Filippi

The terms for each role in a living trust oftentimes get confused with each other. Sometimes people mistakenly believe that a trustee is a beneficiary and vice versa. While this confusion is common, it can cause some misunderstandings amongst family members. Through this article, we plan to dispel some of this confusion.

For a living trust to be legally valid, there are a few roles that must be established in the living trust agreement. First is the trustor, the person, or the people who created the living trust. Then there is the trustee, who manages the living trust (see https://filippilaw.com/what-is-a-trustee). And finally, there is the beneficiary who benefits from the living trust’s assets.

A beneficiary can be an income beneficiary, a principal beneficiary, or both. An income beneficiary will receive as regular distributions from the trust, the income the assets held in the trust produce. This could be anything from stock dividends to rental income. A principal beneficiary will receive the assets actually held in the trust, whether that is cash, a house, or your rare coin collection. The goals you have for your living trust will dictate which type of beneficiary you will designate in your trust agreement.

However, most living trusts utilize both types of beneficiaries to achieve their goals. Trust laws bring with them a tremendous amount of flexibility so that the trustor has the ability to customize their living trust the way they want and not be locked down to a preconceived format created by lawmakers.

How this often works with a typical living trust is when the goal of the trust is to avoid probate and distribute assets to children. For example, say one child is an adult at your death, and the other is still a minor. The living trust could split your assets into two shares, one for each of the children. Then the living trust would distribute the share for the adult child outright without any strings attached. This adult child would be a principal beneficiary. And finally, the trust would hold the share for the minor child in a separate trust for their benefit and care while they are a minor. The trust would distribute whatever amount of income and principal is necessary for their care. This minor child would be both a principal and an income beneficiary depending on the assets they would require for their needs.

This is just a basic example of how a person can benefit from your living trust, but it can be far more complex depending on what you would like to happen with your assets when you pass. Your beneficiary could even be a charity or a scholarship fund that you want to benefit for years to come. The possibilities are truly endless. However, there are many considerations to think of when customizing your plan, ranging from your family, to tax consequences.

We tell our clients to let their imaginations determine how they want their estate to be divided. The easiest way to conceptualize this is to think of the perfect world where no matter what, you have the say on what happens. From there, we are able to customize your plan to accomplish these goals and ensure they have the best chance of actually happening. This is why partnering with an estate planning attorney who truly listens to you and understands the essence of what you want is absolutely critical.

Call us today and we can schedule your first step on your journey to getting your affairs in order!

Satisfied Client Stories

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Anyone in need of a great law firm that does Living Trust/ Wills I highly recommend Filippi Law Firm in Rocklin.
My husband and I needed to have a new Trust done and we were very pleased with

Suzan Henshillwood
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I highly recommend Filippi law firm. Can’t say enough how much I appreciate all they did for me and my living trust. Jim is very helpful and relieved any doubts I had about trust. Very nice law firm and friendly. Thank you Jim for everything and Courtney as well.

Suzan Perfetto
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Very Professional service provided. Handled my trust with professional care and left us feeling very confident. Would recommend Filippi Law Firm to all my friends

Bret Rapozo
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Jim is a personable individual and all the people in the firm are friendly and professional. Creating my trust was painless and has taken a load off my mind.

Jil Voorhies
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We had an outstanding experience with all the Filippi associates we worked with. They were exceptionally professional and friendly. I would highly recommend their services.

John Wendt
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The Filippi Law Firm is very family oriented, professional in every way and quickly responded to any questions my family had. Their end product left nothing to be desired as it was an extremely well thought of and produced legal document. I highly recommend the firm to perform in any capacity of estate planning or administrative law.

Geraldine Dolan

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