Legal Definitions - income beneficiary

An income beneficiary is an individual or entity designated to receive the regular earnings, profits, or interest generated by assets held within a trust or estate. This person receives periodic payments derived from the trust's investments, rental properties, or other income-producing assets. The main body of the assets (known as the principal or corpus) is typically preserved, often for a future distribution to another beneficiary (a "remainderman"), or for the income beneficiary themselves at a later, specified time.

• Example 1: Supporting a Surviving Spouse

  When Mr. Henderson passed away, his will established a trust for his wife, Mrs. Henderson. The trust stipulated that all income generated from his investment portfolio and rental properties would be paid to Mrs. Henderson monthly for the rest of her life. Upon her passing, the remaining principal of the trust would be distributed equally among their children.

  In this scenario, Mrs. Henderson is the income beneficiary because she receives the regular financial distributions (the income) from the trust's assets, allowing her to maintain her lifestyle, while the original assets themselves (the principal) are preserved for their children.

• Example 2: Funding a Child's Living Expenses

  A wealthy grandparent sets up a trust fund for their grandchild, Alex, to ensure he has financial support during his college years and early career. The trust document specifies that Alex will receive quarterly payments derived from the interest and dividends earned by the trust's investments, starting when he turns 18 and continuing until he reaches age 30. At 30, Alex will receive the entire remaining principal of the trust.

  Here, Alex is the income beneficiary during the period from age 18 to 30. He benefits from the regular income stream generated by the trust's assets, which helps cover his living and educational expenses, before he eventually gains access to the full principal.

• Example 3: Charitable Giving with Income Retention

  Dr. Lee, a retired physician, wanted to support her favorite medical research charity while also ensuring a steady income stream for herself during her retirement. She established a Charitable Remainder Annuity Trust (CRAT), placing a significant portion of her stock portfolio into it. The trust agreement states that Dr. Lee will receive a fixed annual payment from the trust for the remainder of her life. After her death, the remaining assets in the trust will be donated to the medical research charity.

  Dr. Lee is the income beneficiary in this arrangement. She receives regular, predictable payments (the income) from the trust's assets, providing her with financial security, while the principal is ultimately designated for the charity.