Beneficiary (trust) - Categorisation

Categorisation

There are various ways in which beneficiaries of trusts can be categorised, depending upon the nature and need of the categorisation.

From the perspective of the trustees' duties, it is most common to differentiate between:

• fixed beneficiaries, who have a simple fixed entitlement to income and capital; and
• discretionary beneficiaries, whom the trustees must make decisions as to the respective entitlements.

Where a trust gives rise to sequential interests, from a tax perspective (and also from the point of view of trustee's duties), it is often necessary to differentiate beneficiaries sequentially, between:

• those with a vested interest, such as tenants for life; and
• those with a contingent interest, such as remaindermen

For the purposes of various exercise of beneficiaries' rights, it is often necessary to distinguish between:

• beneficiaries under a bare trust (including a constructive or resulting trust), to whom the trustee owes basic duties arising by law; and
• beneficiaries under an express trust (either an inter vivos trust or a testamentary trust), where the trustee owes additional duties and has additional powers specified by the trust instrument.