What Is A Qualified Beneficiary?

According to F.S. 736.0103(16), the term “qualified beneficiary” encompasses a small but favored class of trust beneficiaries. The statute limits this class to:

• Current beneficiaries,
• First-line remainder beneficiaries, and
• Intermediate beneficiaries.

It also prioritizes qualified beneficiaries in two key ways. First, qualified beneficiaries have standing in every judicial proceeding that involves their trusts. Second, qualified beneficiaries are at the center of every trustee disclosure obligation.

For example, regardless of what your trust agreement says F.S. 736.0105 states that you, as a trustee, cannot waive the duty under F.S. 736.0813 to notify qualified beneficiaries of a trust of the existence of the trust, of their rights to trust accountings, and of the identity of the trustee. Additionally, the statute states you cannot waive the duty to provide a complete copy of the trust to all qualified beneficiaries. Finally, the statute also states that you cannot waive the duty to respond to requests from qualified beneficiaries of an irrevocable trust for relevant information regarding assets and liabilities of the trust, as well as the particulars relating to trust administration.

In essence, you cannot do your job as a trustee without knowing who the trust’s qualified beneficiaries are. Read on to learn what you need to know about beneficiaries.

Understanding the Qualified Beneficiary Class

Identifying a trust’s qualified beneficiaries is crucial, and can be unexpectedly tricky. The trust code’s 2006 Legislative Staff Analysis went so far as to provide hypothetical cases for those of us trying to pin down exactly which beneficiaries fall within this favored class. Here are two examples to help you get a better understanding of this beneficiary class:

Example 1 — Meaning of Beneficiary. At his death, ninety-year-old D leaves $1,000,000 to T as trustee “to pay the income to D’s spouse S for life, then to distribute trust property to such of D’s descendants as S by will appoints, and in default of appointment in continuing trust to spray income among D’s children from time to time living, and at the death of the last to distribute all trust property per stirpes to D’s then living descendants and if there be none, to D’s alma mater, QB University.” D is survived by S, by two children, C1 and C2, by a grandson Bob (C1’s child) and by a great-granddaughter Fay (Bob’s child). On these facts, the beneficiaries of D’s trust include S, C1, C2, Bob, Fay, QB University, and an indeterminate and unascertainable class of as yet unborn descendants of D. Note that T’s power to spray trust income among D’s children does not make T a beneficiary because T holds that power as a trustee.

The term “beneficiary” refers to persons who have a beneficial interest in a trust as well as to persons who have powers of appointment over trust property in a capacity other than as trustee. It is irrelevant, for this purpose, whether the beneficial interest is present or future, vested or contingent, or whether the person having the interest is ascertainable or even living.

Example 2 — Meaning of Qualified Beneficiary. Same facts as Example 1. The qualified beneficiaries of D’s trust, as of his death, include S, C1, C2 and Bob. S is included because she is a permissible distributee. C1 and C2 are included because they would become permissible distributees were S’s interest to terminate at D’s death (i.e., were she to die at that time). Bob is also a beneficiary because he would take the trust property were the trust to terminate at D’s death (because of the death of S, C1 and C2). As of D’s death, neither Fay nor QB University are qualified beneficiaries. Note, however, that if Bob were to die after D’s death, Fay would then become a qualified beneficiary because she would be entitled to trust property as a consequence of a hypothetical trust termination at that time. That is, the determination of who is a qualified beneficiary is made as of a specific point in time and can change over time.

Are you a trustee? Do you need help to identify the qualified beneficiaries of the trust? Then we have good news for you – Jurado & Farshchian, P.L. can help you. Get in touch with our trust experts today by calling (305) 921-0440 or by sending an email to [email protected].