Generally, a beneficiary is someone who is entitled to present or future enjoyment of trust income or principal or both.[1] The class of persons known as beneficiaries are sometimes referred to by the latin term cestui que trust. A beneficiary must be specified or definitely ascertainable at the time the trust is created.[2] A beneficiary’s right may be contingent, vested, or subject to divestment.[3] The extent of the beneficiary’s interest in the trust can be indefinite at the time trust is created so long as it is definitely ascertainable within the perpetuity period.[4] Where there is more than one beneficiary, the trustee’s duty is to deal with them impartially.[5]
The Trust Code defines “Qualified beneficiary” as “a living individual or other existing person who, on the date of determination of beneficiary status: (A) Is a distributee or permissible distributee of trust income or principal; (B) Would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in subparagraph (A) of this paragraph terminated on that date without causing the trust to terminate; or (C) Would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.”[6]
Unless waived in the trust instrument, within 60 days after creation of an irrevocable trust, or after a revocable trust becomes irrevocable, the trustee must notify all Qualified Beneficiaries of the existence of the trust and the name and mailing address of the trustee.[7] Qualified beneficiaries are reasonably entitled to reports, to the extent of their interest, regarding assets, liabilities, receipts and disbursements of the trust.[8]
A beneficiary’s remedies against a trustee are exclusively equitable, except where there is a duty to pay money or to transfer a chattel immediately and unconditionally.[9] The beneficiary’s remedies include a suit (a) to compel the trustee to perform his duties as trustee; (b) to enjoin the trustee from committing a breach of trust; (c) to compel the trustee to redress a breach of trust; (d) to appoint a receiver to take possession of the trust property and administer the trust; and (e) to remove the trustee.[10] As a general rule, only a beneficiary or one suing on his behalf can maintain a suit against a trustee.[11]
Regarding special needs trusts, keep in mind that the beneficiary must be disabled within the meaning of 42 U.S. Code § 1382c(a)(3). That section provides:
(A)Except as provided in subparagraph (C), an individual shall be considered to be disabled for purposes of this subchapter if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months.
(B)For purposes of subparagraph (A), an individual shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists in the immediate area in which he lives, or whether a specific job vacancy exists for him, or whether he would be hired if he applied for work. For purposes of the preceding sentence (with respect to any individual), ‘work which exists in the national economy’ means work which exists in significant numbers either in the region where such individual lives or in several regions of the country.
Notes:
1. A synonym for beneficiary is cestui que trust, or “one who trusts.” A person is a beneficiary if the settlor manifests an intent to give him a beneficial interest. Restatement (Second) of Trusts, § 127; Cooper v. Trust Co. Bank, 257 Ga. 272 (1987). Any person or entity with capacity to take and hold the legal title to property has capacity to be a trust beneficiary. Restatement, § 116. Absence of that power, or subsequent loss of that power, means there is no capacity to be a trust beneficiary. Id. § 117. Comments to the Restatement do not discuss situations where a conservatorship has been imposed and legal rights have been transferred from the ward to the conservator, but to the extent conservatorship results in a loss of capacity to take and hold property, it is an exception to this rule since the ward could still be beneficiary of a trust.
2. Restatement (Second) of Trusts, § 112. The settlor may be a beneficiary, or may be the sole beneficiary. Id. § 114. There may be more than one beneficiary, Id. § 113, or the members of a class of persons may be trust beneficiaries. Id. § 120. In Miller v. Walker, 270 Ga. 811 (1999), adoption had the effect of removing a grandchild from a class of potential beneficiaries because the settlor’s intent was to benefit a class of individuals and adoption had the effect of removing them from that class.
3. Georgia law favors early vesting. In the case of a testamentary gift, Georgia law favors vesting on the death of the testator. Ursy v. Farr, 274 Ga. 438 (2001). Language that delays vesting must be clear and unambiguous.
4. Restatement (Second) of Trusts, § 129. Certain interests, while they remain indefinite, cannot be reached by creditors. Restatement (Second) of Trusts, § 162.
5. Restatement (Second) of Trusts, § 183.
6. O.C.G.A. § 53-12-2(10).
7. O.C.G.A. § 53-12-242.
8. O.C.G.A. § 53-12-243(a).
9. Restatement (Second) of Trusts, §§ 197 to 198.
10. Restatement (Second) of Trusts, § 199.
11. Restatement (Second) of Trusts, § 200.
