Beneficiary

Written on the 14th of January 2010 by Continuum Financial Planners Pty Ltd

A beneficiary is a person who has a legal right to the use or enjoyment of an asset, even though the asset is not owned in his or her name.

In Trust and Estate situations, the beneficiary must be named to be able to start to enjoy the status bestowed on them: in a Will for bequest purposes, from an estate; but may initially have recognition eligibility by ‘class’ in Trust situations (whether the Trusts are within estates or otherwise). A ‘class’ in this instance may be: a direct relative of a named beneficiary, or an incorporation owned (at least in part) by a named beneficiary; other classes can be found in the terms of the Will or Trust.

The strongest, most certain ‘naming’ process is to be directly named in the forming document, but where a beneficiary who is to receive a benefit by virtue of their being within an allowed class, the trustee will need to pass a resolution specifying which person(s) from that class are to benefit at the relevant time: that resolution should be documented.

In considering eligibility for beneficiaries, benefactors may need to consider the taxation consequences of the nomination, particularly if a sense of equality is intended for a particular group (or class) of beneficiaries. As a beneficiary, a person or entity may be subject to the discretion of the trustee; or a Binding Nomination may be made.

As part of the Estate Planning role we perform at Continuum Financial Planners we are able to guide and advise clients in relation to the appropriateness of particular nominations – and in the context of their Wills, a legal adviser will provide that advice.

We thank McKays Solicitors for allowing us to base our article on this topic on material found in their website.