Income Beneficiary

What Does Income Beneficiary Mean?

An income beneficiary is a person designated to receive a specified amount of income from a trust. While income beneficiaries receive income generated by the trust, they do not have access to the trust’s principal, which is the original amount of money placed into the trust. This income-only setup works on a similar principle to an annuity, which pays out a stream of money while the underlying funds remain controlled by the issuer.

Insuranceopedia Explains Income Beneficiary

Income beneficiaries are often children whose parents establish a trust to provide them with financial support. Grandparents may also set up trusts for their grandchildren. Designating income beneficiaries allows individuals to give money while maintaining some control over its disbursement, reducing the risk of the beneficiaries spending the entire trust irresponsibly. Naming an income beneficiary on a trust raises many of the same questions as naming a beneficiary on a life insurance policy, and the common life insurance beneficiary rules and mistakes to avoid are worth a read before finalizing any designation.