Legal Definitions - definite trust beneficiaries

In the context of a trust, definite trust beneficiaries refers to the requirement that the individuals or groups who will benefit from the trust must be clearly identifiable and ascertainable. This is a fundamental principle because, for a trust to be legally valid and enforceable, there must be specific parties (the beneficiaries) who can hold the trustee accountable for managing the trust assets according to the settlor's wishes.

The identities of these beneficiaries must be determined using objective standards. This means they can be:

• Individually named by the person creating the trust (the settlor).
• Identified as a specific group or class of people, provided there are clear, objective criteria to determine who belongs to that group.

If the beneficiaries cannot be objectively identified, the trust may fail and be considered unenforceable, unless it is a charitable trust. Charitable trusts are an exception because they are typically enforced by the state's attorney general rather than specific individuals.

Here are some examples illustrating the concept of definite trust beneficiaries:

• Example 1: Individually Named Beneficiaries

  A person creates a trust stating, "The income from this trust shall be distributed annually to my niece, Sarah Jenkins, and my nephew, Michael Chen, in equal shares."

  Explanation: In this scenario, the beneficiaries are explicitly named individuals. There is no ambiguity about who is to receive the benefits, making them definite trust beneficiaries.

• Example 2: Objectively Defined Class of Beneficiaries

  A trust is established with the provision that "The funds in this trust shall be used to provide scholarships for any student who graduates from Northwood High School with a GPA of 3.5 or higher and is accepted into an accredited four-year university."

  Explanation: While not individually named, the beneficiaries form an ascertainable class. The criteria (graduating from a specific high school, achieving a particular GPA, and university acceptance) are objective and verifiable, allowing for the clear identification of who qualifies as a beneficiary.

• Example 3: Lack of Definite Beneficiaries (Unenforceable)

  A trust document states, "The trustee shall distribute the trust assets among my most deserving acquaintances."

  Explanation: This trust would likely fail due to a lack of definite beneficiaries. The term "most deserving acquaintances" is subjective and lacks objective standards. There is no clear, verifiable way for a trustee or a court to determine who fits this description, making the beneficiaries unascertainable.