Beneficiary

1. Beneficiary

2. Generally -- § 111.004(2), (10) • Holds equitable title. • Enforces fiduciary duties against trustee. • Capacity = ability to take and hold property.

3. Description of Beneficiaries • Must be clearly ascertainable. • Problems 1-3, page 81

4. Description of Beneficiaries • Multiple beneficiaries allowed: • Concurrent • Successive

5. Honorary (Purpose) Trusts • Trust lacking a human beneficiary or charitable purpose. • Care for pet • Say masses • Erect monuments

6. Honorary (Purpose) Trusts • Traditional approach = invalid • Not private as no human beneficiary • Not charitable as lacking charitable purpose

7. Honorary (Purpose) Trusts • Modern trend • Pets = 45 states plus D.C. recognize statutory pet trusts • Trust Code § 112.037 • Other purposes = allowed under UPC and UTC • No equivalent provision in Trust Code.

8. Incidental Beneficiary • No equitable title but benefits from the trust nonetheless. • Typically, unable to enforce trust. • Perhaps fit as “interested person” under “affected by” language of § 111.004(7).

9. Disclaimer – Inter vivos Trust§ 112.010 • Cannot exert dominion, control, or accept benefits. • May “cherry pick” (partial disclaimers allowed). • Irrevocable and unconditional

10. Disclaimer – Inter vivos Trust§ 112.010 • Formalities: • In writing. • Acknowledged (notarized). • Delivered to trustee not later than 9 months after the later of: • Date of trust creation • Beneficiary reaching age 21 • If future interest, date it indefeasible vests

11. Disclaimer – Inter vivos Trust§ 112.010 • Passage of property • Under specific terms of trust (“If A disclaims, then the property passes to X.”) • Under terms of trust as if beneficiary predeceased trust creation.

12. Disclaimer – Testamentary TrustProbate Code § 37A [same as we learned for disclaiming as a beneficiary of a will]

13. Characterization of Distributions • Issue arises if beneficiary is married. • Assume trust is not created by one or both spouses.

14. Characterization of Distributions • Principal distributions • Beneficiary’s separate property (gift)

15. Characterization of Distributions • Undistributed trust income • Not yet able to classify until beneficiary has a right to demand distribution.

16. Characterization of Distributions • Discretionary income distributions • Separate.

17. Characterization of Distributions • Mandatory income distributions • Commentators disagree and case law not definitive.

18. Settlor’s divorce from beneficiaryProbate Code §§ 471-473 • When statute applies: • Trust created on or after September 1, 2005. • Trust is written. • Trust is revocable. • Settlor named his/her spouse as beneficiary. • Settlor later divorces spouse. • Trust is silent as to impact of divorce.

19. Settlor’s divorce from beneficiaryProbate Code §§ 471-473 • Statutory revocation of the following provisions: • Ex-spouse as beneficiary. • Ex-spouse as trustee. • Other ex-relatives as beneficiary. • Other ex-relatives as trustee.

20. Settlor’s divorce from beneficiaryProbate Code §§ 471-473 • Effect • Property passes as if ex-spouse or ex-relative disclaimed. • Fiduciary designations interpreted as if ex-spouse or ex-relative died before marriage terminated.

21. Power to Transfer or Assign • Presumption = able to transfer: • Inter vivos (by gift or sale) • At death (via intestacy or by will)

22. Power to Transfer or Assign • Restrictions: • Life Interest – Beneficiary only received a life interest. • Spendthrift provision – Beneficiary prohibited from transferring.

23. Power to Transfer or Assign • Priority of Assignments • Note 1, page 86 • English view = notice necessary to complete the assignment as against a subsequent assignee • American view = first assignee prevails