Define: Discretionary Beneficiary

A discretionary beneficiary is an individual or entity named in a trust or insurance policy who may receive benefits or distributions at the discretion of the trustee or policyholder, rather than according to a predetermined schedule or criteria. Unlike mandatory beneficiaries, who are entitled to receive benefits as specified by the terms of the trust or policy, discretionary beneficiaries have no automatic right to distributions. Instead, the trustee or policyholder has the discretion to determine if, when, and how much to distribute to discretionary beneficiaries based on various factors, such as their needs, circumstances, or the purposes of the trust. This arrangement provides flexibility and allows the trustee or policyholder to respond to changing circumstances and make decisions in the best interests of the beneficiaries and the overall objectives of the trust or policy.

A person or a company named in a trust to whom distributions are made. The property is entrusted to a trustee who has the right to pay to the beneficiary any income generated from the property. The beneficiary cannot compel the trustee to make any payments to him; rather, it is the trustee who has the discretion to determine whether distributions to the beneficiary will be made.

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This glossary post was last updated: 29th March 2024.