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What Is a Remainder Beneficiary?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 19 November 2016
  • Copyright Protected:
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    Conjecture Corporation
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A remainder beneficiary is an individual or entity that is entitled to support from a trust once the interests of all prior beneficiaries have been exhausted. At this point, this remaining beneficiary has claim on any assets still left in the trust, subject to any instructions put in place by the grantor of the trust. This type of arrangement is often very effective in making sure that all assets of the estate are ultimately used in whatever manner desired by the original owner, and may sometimes involve multiple generations of beneficiaries.

Typically, a remainder beneficiary is a means of making sure that once primary beneficiaries no longer have need of the assets in the trust, the grantor can still designate what ultimately happens with those assets. For example, the grantor may set aside a residence for a child, with the stipulation that the child is free to live on the property for his or her entire life. The trust arrangement may call for the trust to see to all costs of maintenance and upkeep as well as paying property taxes. When the child passes away or voluntarily chooses to abandon the property for any reason, the provisions in the trust may call for bequeathing the property to a charity that is named as the remainder beneficiary.

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The use of a remainder beneficiary arrangement can apply to just about any type of asset that is held by the trust. In addition to property, the arrangement can have to do with stocks, bonds, and any other financial holdings that are included in the arrangement. This makes it possible to ensure that cash disbursements from the trust that are made based on returns from investments can go first to a child of the grantor, then later to a grandchild once the child is deceased. A remainder beneficiary arrangement can even be used to ensure that the spouse of the grantor is able to remain in the family home for the rest of his or her life, with provisions to prevent the sale of the property and the disbursement of the proceeds until after the spouse has died.

Typically, the concept of the remainder beneficiary is to ensure that those the grantor wishes to provide with some sort of ongoing support are properly taken care of and that the holdings in the trust are ultimately disposed of in a manner that is in line with the wishes of the grantor. Arrangements of this type are subject to the laws and regulations that apply in the jurisdiction where the trust is established, making it necessary to structure the trust in accordance with those laws. Financial and legal professionals can aid in arranging the trust to include this type of provision, making it possible to ensure that any remainder beneficiary involved is provided for in due time.

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