Income beneficiary definition
/What is an Income Beneficiary?
An income beneficiary is a person to whom the net income of a trust is or may be payable. Income beneficiaries are identified in the trust agreement of a trust. This person is only entitled to the trust income during the term of the trust, or until a designated event occurs (such as the beneficiary reaching a certain age, such as 21 years old). At this point, the remaining principal in the trust is transferred to one or more remainder beneficiaries.
Examples of an Income Beneficiary
There are multiple situations in which a party could be designated as an income beneficiary. Here are several examples:
A spouse. In a marital trust, the surviving spouse may be named as the income beneficiary, receiving income from the trust’s assets during his or her lifetime.
A child. Parents may set up a trust for their child’s education, where the child receives income from the trust to pay for tuition and other expenses.
A charity. A charitable remainder trust might designate a charity as the income beneficiary, receiving income from the trust for a specific period of time, or until the trust terminates.
Disabled family member. A special needs trust might have a disabled family member as the income beneficiary, receiving income to cover his or her living and medical expenses.