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What Is a Beneficiary Trust?

A trust is a means of transferring property—whether it is tangible or intangible— or funds from one party to another. There are different forms of a trust, one such form is a beneficiary trust. This kind of trust allows the grantor, or the creator of the trust, to bestow assets and other forms of property for the use of the beneficiary, the one receiving the trust.

A beneficiary trust is created by a grantor in order to prevent the loss from such assets due to divorce, income taxes, estate taxes, lawsuits, and other issues. It is a type of irrevocable trust that provides the beneficiary with an intact trust, rather than one that is deducted due to the aforementioned issues. The main advantage of a beneficiary trust is that the beneficiary is in charge of the administration of the trust. Thus, the beneficiary can make investment decisions regarding the assets in the trust and not have to pay the taxes despite the income derived from such investments.

A beneficiary trust is not akin to a beneficiary of a trust. The former has the grantor or creator relinquishing all rights and responsibilities regarding the trust to his or her beneficiary, while the latter is merely a recipient of the trust and is bound to the terms and conditions set by the grantor in a trust. Thus, a beneficiary trust gives the beneficiary of that trust more power and control over the trust rather than any other beneficiary of any other trust.

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